WorksheetsPersonal Finance: U5 Managing Credit Test
Total questions: 52
Worksheet time: 29mins
What does "purchasing power" refer to?
The ability to buy goods and services
The total amount of money in circulation
The interest rate on a loan
The value of a country's currency
What is the "balance due" on a credit card statement?
The minimum payment required
The total amount owed
The interest charged
The available credit limit
What does "deferred billing" mean?
Paying bills immediately upon receipt
Delaying payment until a later date
Paying bills in installments
Receiving a discount for early payment
Which of the following best describes a "closed-end loan"?
A loan with no fixed repayment schedule
A loan that can be borrowed again once repaid
A loan with a fixed amount and repayment period
A loan with a variable interest rate
What is a "variable rate"?
An interest rate that remains the same throughout the loan term
An interest rate that changes based on market conditions
A fixed monthly payment
A penalty fee for late payments
Which of the following is an example of a fixed-rate loan?
A mortgage with an interest rate that changes annually
A mortgage with an interest rate that remains the same for the entire term
A credit card with a variable interest rate
A savings account with an interest rate that fluctuates
Why is it important to read the "fine print" in a contract?
It contains the main terms of the agreement
It includes detailed information about fees and conditions
It provides a summary of the contract
It lists the benefits of the agreement
What is the primary purpose of refinancing a loan?
To increase the loan amount for additional spending
To avoid making monthly payments
To replace an existing loan with a new one that has better terms
To transfer the loan to another person
What percentage of your FICO score is determined by your payment history?
15%
25%
35%
45%
What does amortization refer to in the condition of loans?
Increasing the loan amount to cover additional expenses
Paying only the interest on a loan each month
Gradually repaying a loan through scheduled payments that include both principal and interest
Transferring a loan to another financial institution
Which is a responsibility that you have to your creditor?
Pay off the balance in full each month
Make payments on time
Shop around for the best deals
All answers are correct
What is the main goal of the Truth in Lending Act (TILA)?
To protect consumers from unfair lending practices
To regulate the stock market
To provide grants for small businesses
To limit the amount of interest that can be charged
What does the Credit Card Act aim to do?
Increase credit card limits
Protect consumers from unfair credit card practices
Lower interest rates on credit cards
Provide rewards for credit card usage
How can having a mix of credit accounts, such as a mortgage, car loan, and credit cards, affect your financial flexibility?
It limits the amount of credit you can access
It can improve your creditworthiness by showing you can manage different types of credit
It makes financial management more complex
It has no effect on financial flexibility
What is one of the main objectives of the Dodd-Frank Act?
To deregulate the banking industry
To increase transparency and accountability in the financial system
To provide tax breaks for large corporations
To reduce the national debt
What is credit?
The ability to save money
The ability to borrow money and pay it back later
The ability to invest money
The ability to earn money
What is debt?
Money that must be repaid
Money that is saved
Money that is invested
Money that is earned
What is collateral?
Money that must be repaid
Property that can be used as security for a loan
A type of credit card
A form of investment
What is a line of credit?
A preapproved loan amount that a debtor can borrow as needed with no collateral
A savings account
A checking account
An investment account
Which of the following is an advantage of credit?
Increased purchasing power
Finance charge
Reduction of future buying power
Overspending
Which of the following is a source of credit?
Credit card companies
Retail stores
Banks and credit unions
All of the above
Which financial institutions make loans to their members only?
Banks
Credit unions
Finance companies
Pawnbrokers
What is a finance company?
An organization that makes high-risk consumer loans
A type of credit union
A retail store offering credit
A private lender
What is a usury law?
A law that sets a maximum interest rate for consumer loans
A law that prohibits credit card usage
A law that mandates minimum payments
A law that regulates finance companies
What is a finance charge?
The total dollar amount of all interest and fees paid for the use of credit
The minimum payment required each month
The principal amount of a loan
The annual fee for a credit card
What is a balance transfer fee?
A fee for moving a balance from one credit card account to another
A fee for withdrawing cash from a credit card
A fee for late payments
A fee for exceeding the credit limit
What is a grace period?
The amount of time you have to pay your current credit card balance in full to avoid paying interest
The period of time between credit card billings
The minimum payment required each month
The total dollar amount of all interest and fees paid for the use of credit
What is a billing cycle?
The period of time between credit card billings
The amount of time you have to pay your balance
The minimum payment required each month
The total dollar amount of all interest and fees paid for the use of credit
What is the Adjusted Balance Method?
A method of computing interest based on the balance at the end of the billing cycle
A method of computing interest based on the average daily balance
A method of computing interest based on the previous balance
A method of computing interest based on the balance after payments and credits
The Previous Balance Method is:
a method of calculating interest based on the balance at the start of the billing cycle.
a method of calculating interest based on the balance at the end of the billing cycle.
a method of calculating interest only on new purchases.
a method of calculating interest after payments are made during the billing cycle.
What is the correct answer?
A method of computing interest based on the balance at the end of the billing cycle
A method of computing interest based on the average daily balance
A method of computing interest based on the balance after payments and credits
A method of computing interest based on the balance at the beginning of the billing cycle
What is the Average Daily Balance Method?
A method of computing interest based on the balance at the end of the billing cycle
A method of computing interest based on the average balance each day during the billing cycle
A method of computing interest based on the balance after payments and credits
A method of computing interest based on the balance at the beginning of the billing cycle
What is creditworthiness?
The ability to repay a loan
The amount of credit you have
The interest rate on a loan
The total amount of debt you owe
Which of the following is NOT a major credit bureau?
A) Equifax
B)Experian
C)TransUnion
D)Credit Karma
What is a credit report?
A summary of your bank account balances
A written statement of a consumer’s credit history
A list of your monthly expenses
A report of your employment history
How often are you entitled to a free credit report from each of the three major credit bureaus?
Every 6 months
Every 12 months
Every 2 years
Every 5 years
What is the purpose of a credit freeze?
To increase your credit score
To deny all access to your credit information
Which of the following is NOT one of the five Cs of credit?
A) Character
B) Capacity
C) Capital
D) Credit Score
What is collateral?
A) A type of credit card
B) Property pledged to assure repayment of a loan
C) A measure of your credit score
D) A type of bank account
Which of the following is a step to get started with credit?
Open a savings account
Apply for multiple credit cards at once
Avoid using any credit
Close all existing accounts
What is a FICO score?
A type of bank account
A measure of your creditworthiness
A loan interest rate
A type of investment
What is the highest possible FICO score?
750
800
850
900
Which factor does NOT affect your FICO score?
Payment history
Amounts owed
Length of credit history
Number of dependents
No question text is visible, only the answer: D
What is a credit inquiry?
A request to check your credit by a business
A summary of your credit report
A type of credit card
A loan application
How long does negative information stay on your credit report (excluding bankruptcy)?
3 years
5 years
7 years
10 years
What is the purpose of a debt repayment plan?
To increase debt
To reduce the total interest paid
To avoid paying debt
To increase credit score
What is long-term debt?
Debt that matures in less than one year
Debt that matures in more than one year
Debt that does not need to be repaid
Debt that is forgiven
What is the 20/10 rule?
Using no more than 20% of yearly take-home pay on credit, with payments no more than 10% of monthly take-home pay
Using 20% of monthly income on credit
Using 10% of yearly income on credit
Using 20% of monthly income on savings
What is predatory lending?
Fair and transparent lending practices
Unfair, deceptive, and fraudulent loan practices
Low-interest loans
Government-backed loans
What is the primary focus of the debt avalanche method?
Paying off the smallest debts first
Paying off debts with the highest interest rates first
Paying off debts with the longest terms first
Paying off debts with the lowest interest rates first
What is the primary focus of the debt snowball method?
Paying off the smallest debts first
Paying off debts with the highest interest rates first
Paying off debts with the longest terms first
Paying off debts with the lowest interest rates first
