WorksheetsUnit 4- Credit Review
Total questions: 72
Worksheet time: 4hrs 31mins
If your credit is not good, you are viewed as a credit risk.
True
False
If you do not have a strong credit score, which could be a consequence? (select all that apply)
You will eventually file bankruptcy due to debt
Being denied for the line of credit you applied for
larger down payment requirement
high interest rates
Which is action is suggested to keep your credit score healthy? (select two)
Make payments on time
Keep your utilization low
Apply for as many credit cards as possible to start building your credit
Apply for several new account in a short amount of time
After how many days LATE will a company send the notice to the credit bureau?
5 days
7 days
15 days
30 days
Which is an example of " closed-end credit"?
Auto loan
Discover Credit Card
Frontier WiFi
Carnival Master Card
A credit score of 580 is considered...
Poor
Fair
Good
Excellent
Which is an example of "service credit"?
Frontier WiFi
Discover Master Card
Auto Loan
Capital One Credit Card
What is a risk of having a credit card?
Collecting reward points
Overspending and becoming in debt
Building a strong credit score
People may ask to borrow your card.
Which are advantages of having a healthy credit score? (select all that apply)
Lower interest rates
Better odds of getting approved for future lines of credit
lower security deposits/down payments
higher interest rates
Scarlett has just received her first credit card. She notices a term 'credit limit' on her card. What does this 'credit limit' mean?
It sets a maximum borrowing or spending limit for Scarlett.
It increases Scarlett's chances of getting approved for a loan.
It helps Scarlett to track and manage her expenses.
It allows Scarlett to earn rewards and cashback on her purchases.
Isla is planning to take a loan for her new car. Benjamin explained to her about the role of interest rates in loans. Which of the following statements correctly represents what Benjamin might have told her?
Interest rates in loans have no impact on the cost of borrowing money.
Interest rates in loans determine the repayment schedule.
Interest rates in loans are determined by your credit score, Isla.
Interest rates in loans determine the cost of borrowing money, Isla.
Scarlett is looking for ways to improve her credit score. What advice would you give her?
She should pay her bills late, increase her credit card balances, apply for new credit frequently, close old accounts, and never check her credit report.
She should pay her bills on time, reduce her credit card balances, limit new credit applications, keep old accounts open, and check her credit report regularly.
Noah is considering filing for bankruptcy due to some financial difficulties. Hannah, a financial advisor, is explaining the consequences to him. What did she say about the impact of bankruptcy on Noah's credit score?
Bankruptcy has no impact on your credit score.
Bankruptcy can significantly lower your credit score and stay on your credit report for several years.
Bankruptcy can improve your credit score.
Bankruptcy only affects your credit score if you have a high income.
Emma recently got her first credit card. She is confused about the purpose of a minimum payment on the credit card. Can you help her understand?
The minimum payment is the amount Emma must pay to avoid late fees.
The minimum payment is the total amount Emma owes for the month.
The minimum payment is the amount Emma must pay to avoid interest charges.
The minimum payment is the amount Emma must pay to close the credit card account.
Ethan is considering taking a loan for his new house. He is confused between a fixed-rate and a variable-rate loan. Can you explain the difference to him?
A fixed-rate loan has an interest rate that changes over time, while a variable-rate loan has an interest rate that stays the same.
A fixed-rate loan has an interest rate that stays the same over the life of the loan, while a variable-rate loan has an interest rate that can change.
A fixed-rate loan can only be used for purchasing homes, while a variable-rate loan can be used for any purpose.
A fixed-rate loan requires a down payment, while a variable-rate loan does not.
Olivia is considering applying for a personal loan. What factors should she consider to ensure she gets the best interest rate?
Her credit score, the loan term, and the lender's reputation.
The color of her car, her favorite food, and her pet's name.
The number of credit cards she owns, her social media activity, and her travel history.
Her favorite TV show, her shoe size, and her favorite color.
Emma wants to know how often she should check her credit report. What is the recommended frequency for checking one's credit report?
Once every five years.
Once a month.
Once a year.
Every time she makes a purchase.
Benjamin is applying for a loan and the bank requests his credit report. What information can the bank expect to find in Benjamin's credit report?
Medical history, criminal records, and political affiliations.
Personal identification details, credit accounts, payment history, public records, and inquiries.
Social media activity, online shopping history, and travel records.
Credit scores, employment history, and income details.
Benjamin wants to improve his credit score. How is his credit score calculated?
Credit score is calculated based on the number of credit cards Benjamin has.
Credit score is calculated based on the number of times Benjamin has applied for a loan.
Credit score is calculated based on the amount of money Benjamin earns.
Credit score is calculated using various factors such as payment history, credit utilization, length of credit history, types of credit used, and new credit inquiries.
Abigail needs to buy a car and is considering two types of loans: a secured loan and an unsecured loan. What is the difference between these two types of loans?
A secured loan has a higher interest rate than an unsecured loan.
A secured loan requires a co-signer, while an unsecured loan does not. In this case, Grace could co-sign for Abigail.
A secured loan is backed by collateral, such as Charlotte's car, while an unsecured loan is not.
A secured loan is only available to individuals with good credit, like Charlotte, while an unsecured loan is available to anyone, including Abigail and Grace.
What is debt?
Another word for death
Something, typically money, that is owed or due
A loan on which you do not have to pay interest
That which is incurred during childhood and consummated in college
Revolving credit is...
a type of credit that can be used repeatedly up to a certain limit as long as the account is open and payments are made on time.
a type of credit that can be used only once up to a certain limit and must be closed immediately after all payments are due
a spinning door with money in it
a round device that holds credit cards and spins, making it easy to shuffle through all your credit cards quickly
What is a credit score?
a number between 300 and 850 representing your creditworthiness
a statistical number that evaluates a consumer's creditworthiness and is based on credit history.
Often referred to as a FICO score
All of the above
What is a credit report?
A detailed report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness
A detailed report of a bank's credit history prepared by a credit expert and used by consumers in determining a bank's creditworthiness
A report which shows which credit cards are better than others
A report invented by Allan Greenspan and credited to Al Gore
What is the purpose of a Schumer Box?
To show the credit score required for the credit card
To display the credit limit of the cardholder
To disclose rates and fees of a credit card in a standardized format
To list the rewards available with a credit card
Who sponsored the legislation that led to the creation of the Schumer Box?
Senator Elizabeth Warren
Representative Nancy Pelosi
Senator Chuck Schumer
Representative Paul Ryan
What must be disclosed in a Schumer Box?
Credit card color options
Rates, fees, and other key financial information
Cardholder's personal information
List of authorized users
What does APR stand for?
Annual Percentage Rate
Annual Payback Ratio
Automated Payment Requirement
Adjusted Payment Rate
What is a grace period as mentioned in the Schumer Box?
Duration of the credit card's validity
Time to report a lost or stolen card
Time allowed for disputing a transaction
Time period to repay balance before interest is charged
What does the Schumer Box help consumers compare?
Rewards programs
Credit card issuers' customer service
Credit card designs
Rates and fees between credit cards
Why is the Schumer Box important?
To promote credit card companies
To confuse consumers about credit card terms and fees
To provide consumers with standardized information about credit card terms and fees.
To hide information about credit card terms and fees
Can you provide an example of a Schumer Box?
A Schumer Box is a box used for storing items.
A Schumer Box is a type of musical instrument.
A Schumer Box is a table that provides a summary of the costs and terms of a credit card agreement.
A Schumer Box is a term used in boxing to describe a specific technique.
What is a FICO Score?
A three-digit number based on credit reports
A summary of credit history
A measure of creditworthiness
All of the above
Why do lenders use FICO Scores?
To determine loan repayment likelihood
To decide how much to lend
To set interest rates
All of the above
What is considered a good FICO Score?
Scores above 670
Scores below 580
Scores between 580-669
Scores above 800
What is the rating for a FICO Score below 580?
Poor
Fair
Good
Very Good
Payment History and Utilization
As a loan matures, larger portions go towards paying down the
principal balance
interest
loan term
none of the above
If you have an amortized loan, your monthly payment will _______________
never be the same
sometimes be the same
always be the same
If a friend of yours had never heard of amortization before and asked you to explain how loan payments work, what would you say?
Amortization is a scheduled breakdown of how much you'll pay every month (fixed) to repay a loan. It shows what portion of your payment is going to interest an principal each month.
Every month, you pay the interest due first, and then all remaining portions of your payment goes toward paying down the principal balance
Both statements are true.
Amortization is made up of what two parts?
Interest and payment
Principal and payment
Interest and principal
none of the above
Find the principal: The fixed payment is $250.50, the interest portion is $6.75
243.75
250.50
257.25
6.75
The schedule prepared showing the installment payments for the period (called the term of the loan) is called___________.
Amortization Table
Payment Method Table
Installment Payment Table
Mortgages Table
The installment payment on the loan is termed____________.
Down payment
Mortgages
Amortization
Buyer's equity
Mortgages with shorter terms have higher monthly payments. Why would anyone want a short-term mortgages?
You pay less in principal in total
You pay less interest in total
You pay less in property taxes in total
You pay less in insurance and processing fees
What is a characteristic of an adjustable-rate mortgage (ARM)?
The interest rate is always higher than a fixed-rate mortgage
The interest rate can change periodically after an initial period
The interest rate remains constant over time
The interest rate is set by the government
What does a fixed-rate mortgage offer?
A rate that changes based on market trends
A rate that stays the same for the life of the loan
A rate that increases annually
A rate that is determined by the prime rate
What are rate caps in an ARM designed to do?
Determine the loan term
Set the initial interest rate
Limit how much the interest rate can change
Increase the interest rate annually
Why might someone choose a fixed-rate mortgage?
They expect interest rates to decrease in the future
They want the lowest possible rate at the start
They plan to move before the initial rate period ends
They prefer predictable payments over the loan term
What is a disadvantage of a fixed-rate mortgage compared to an ARM?
Less predictability in payments
Interest rate increases over time
No rate caps
Higher initial interest rates
What could be a benefit of choosing an ARM?
No interest rate caps
Guaranteed rate decrease
Lower initial interest rate
Fixed interest rate for 30 years
What is a potential risk of an ARM?
The interest rate could decrease significantly
The loan term is shorter than fixed-rate mortgages
The interest rate is fixed for the loan term
Monthly payments could increase when the rate adjusts
What is the main advantage of a fixed-rate mortgage over an ARM?
Shorter loan terms
The ability to change interest rates based on market trends
The interest rate and monthly payments stay the same for the life of the loan
Lower initial payments
What are some differences between federal and private student loans?
Federal student loans are funded by the government
Federal student loans offer income-driven repayment plans
Private student loans have have forgiveness options
Private student loans are funded by private organizations
Why should you explore your federal loan options before private loan options?
Which student loan does NOT charge you interest while you're in school as an undergraduate?
Direct Subsidized
Direct Unsubsidized
Direct PLUS
Private
What is a secured loan?
A loan that is backed by a promise to repay without any collateral.
A loan that is backed by collateral, such as a house or car.
A loan given without any background credit check.
A loan with a variable interest rate that changes over time.
Which of the following is correct?
On subsidized loans, you never pay any interest; you pay interest on unsubsidized loans.
On subsidized loans, the government pays the interest while you're in college, and then you pay the interest once you're no longer enrolled.
With subsidized loans, if you don't graduate and earn a diploma, you don't have to pay those loans back. All unsubsidized loans must be repaid.
Subsidized loans come from private banks, while unsubsidized loans come from the Federal government.
An unsubsidized loan is one where ___________________ pays the interest while the student is still enrolled in school.
the borrower (i.e. student, parent)
the federal government
A subsidized loan is one where _____________________ pays for the interest while the student is still enrolled in school.
the federal government
the parents
the borrower
What is the most important fact to know about student loans?
They do not need to be repaid.
They have to be repaid.
They are only available for graduate students.
They are interest-free.
Looking at the following credit report, what do you notice regarding the account history?
the borrower paid everything on time
the borrower was 30 days late on May 2015
The borrow has a balance of $2000
the Borrower has a closed end line of credit
What is true regarding the following Schumer box?
your APR will be somewhere between 8.99-12.99
Penalties will apply for on time payments
Your due dates are by 15 days of the billing cycle
you are not charged interest
What is a credit balance?
the maximum amount of money you can borrow with one card
the minimum amount of money you can borrow with one card
the actual amount of money that you borrowed/spent
the amount of money that must be repaid
How can a cardholder avoid paying interest on a credit card?
Do not pay anything
Pay the minimum payment after its due date
Pay the balance in full every month
Pay the minimum balance every month
How can a cardholder avoid paying interest on a credit card?
Do not pay anything
Pay the minimum payment after its due date
Pay the balance in full every month
Pay the minimum balance every month
