WorksheetsCredit Questions
Total questions: 44
Worksheet time: 32mins
Which of the following make up the 5 C's of Credit? Select all that apply.
Capacity
Capital
Character
Collateral
Conditions
The 5 C's of credit indicate the credit worthiness of an individual. Which of the following best describes the "Capital" indicator?
Determines by the borrower's current financial assets and net worth
Indicates the borrower's ability to pay back a loan.
Shows the borrower's handling of past debts and his or her stability in jobs and residences.
Indicates the borrower has something of value to pledge as security for the loan.
The general state of the economy.
The 5 C's of credit indicate the credit worthiness of an individual. Which of the following best describes the "Collateral" indicator?
Determines by the borrower's current financial assets and net worth
Indicates the borrower's ability to pay back a loan.
Shows the borrower's handling of past debts and his or her stability in jobs and residences.
Indicates the borrower has something of value to pledge as security for the loan.
The general state of the economy.
The 5 C's of credit indicate the credit worthiness of an individual. Which of the following best describes the "Character" indicator?
Determines by the borrower's current financial assets and net worth
Indicates the borrower's ability to pay back a loan.
Shows the borrower's handling of past debts and his or her stability in jobs and residences.
Indicates the borrower has something of value to pledge as security for the loan.
The general state of the economy.
What does a credit score measure?
The borrower's overall income and wealth.
The borrower's level of education.
The borrower's likelihood of repaying borrowed money based on his or her credit history.
How much money the borrow currently has in his or her bank account
How can a borrower reduce the amount of interest they will pay on credit card debt? Select all that apply.
Pay the full balance of their credit card every month.
Make late payments to avoid fees.
Transfer the balance to a lower-interest card.
Pay more than the minimum payment each month
A person with a credit score under 600 is looking for a mortgage loan to purchase a home. His interest rate on the mortgage will most likely be
Higher than average
Lower than average
Based on inflation
The same as someone with a score of 800
Match terms with their correct definition.
APR
The yearly cost of borrowing, including interest and fees.
Interest Rate
The percentage charged for borrowing money, usually expressed annually
Minimum Payment
The smallest payment a borrower can make to keep a credit card account in good standing.
Principal
The original amount of money borrowed before interest.
Balance
The amount still owed on a loan or credit account.
What is a secured loan?
A loan backed by collateral such as a house or car
A loan not backed by collateral and based mostly on creditworthiness.
A loan that is only offered to someone with a very high credit score.
A loan with a really low interest rate.
What is an unsecured loan?
A loan backed by collateral such as a house or car
A loan not backed by collateral and based mostly on creditworthiness.
A loan that is only offered to someone with a very high credit score.
A loan with a really low interest rate.
What is the main difference between revolving credit and installment credit?
Revolving credit must be used only for emergencies, while installment credit is for everyday purchases
Revolving credit allows you to borrow up to a limit and repay repeatedly, while installment credit is repaid in fixed payments over a set period of time.
Revolving credit always has lower interest rates than installment credit
Revolving credit requires collateral, while installment credit does not
Explain whether this is a SMART or DUMB credit choice. You must explain it. Buying a designer bag on credit and making only the minimum payments.
Explain whether this is a SMART or DUMB credit choice. You must explain it. Using a high-interest payday loan to cover a trip to the beach for you and 3 of your closest friends.
Explain whether this is a SMART or DUMB credit choice. You must explain it. Paying off your credit card balance in full each month.
Sometimes, lenders allow or require a down payment before they extend a loan. What would be the advantage to the lender? What would be the advantage to the borrower? You must answer both parts of this question.
What is the key difference between a fixed-rate and a variable-rate credit card?
Fixed-rate cards have no fees, while variable-rate cards always charge annual fees
Fixed-rate cards guarantee the interest rate will never change, while variable-rate cards change interest rates daily
Fixed-rate cards have interest rates that generally stay the same unless the issuer gives notice, while variable-rate cards have interest rates that can change based on the market
Fixed-rate cards are only for people with excellent credit, while variable-rate cards are for everyone else
What happens in a Chapter 7 bankruptcy?
Debts are reorganized into a 3–5 year repayment plan
Most unsecured debts are wiped out through liquidation of non-exempt assets
Only business debts can be discharged
The court prohibits creditors from reporting to credit bureaus
What is the main feature of Chapter 13 bankruptcy?
The debtor must sell all assets to repay creditors
The debtor receives an immediate discharge of all debts
The debtor follows a court-approved payment plan over 3–5 years
Only corporations are eligible
Chapter 11 bankruptcy is most commonly used for which purpose?
Reorganizing debts for businesses so they can continue operating
Liquidating personal assets to eliminate unsecured debt
Providing student loan forgiveness
Settling tax obligations only
Which of the following are advantages of having a credit card? (Select all that apply.)
It helps build a credit history when used responsibly
It provides fraud protection on purchases
It guarantees you will never go into debt
It may offer rewards such as cash back or travel points
It allows you to make purchases even if you don’t currently have the cash, within your credit limit
Which of the following are potential disadvantages of having a credit card? (Select all that apply.)
High interest charges if you carry a balance
Risk of overspending due to easy access to credit
Possibility of fees such as annual fees or late payment fees
Guaranteed improvement of your credit score regardless of how you use it
Potential damage to your credit score if payments are missed
Why should a consumer care about his or her credit score?
It affects their ability to get loans, credit cards, or favorable interest rates
It determines how much money they can earn at a job
It shows how much money they currently have in the bank
It guarantees you will never have financial problems
What is the range for a credit score?
400 - 1000
300 - 850
250 - 800
300 - 1000
What is another way to say "collateralized loan"?
Secured loan
Unsecured loan
Open ended credit
Revolving Credit
What information is NOT included when calculating an individual's credit score?
Consumer's salary
Consumer's payment history
Consumer's outstanding debt
Consumer's pursuit of new credit.
Which law protects consumers by allowing them to dispute billing errors on credit card statements and limits their liability for unauthorized charges?
Truth in Lending Act
Fair Credit Billing Act
Fair Credit Reporting Act
Equal Credit Opportunity Act
Which law requires lenders to provide clear information about loan terms, including interest rates and fees, so consumers can compare credit options?
Truth in Lending Act
Fair Credit Billing Act
Fair Credit Reporting Act
Equal Credit Opportunity Act
Which law gives consumers the right to access their credit reports, dispute inaccurate information, and limits how credit information can be shared?
Truth in Lending Act
Fair Credit Billing Act
Fair Credit Reporting Act
Equal Credit Opportunity Act
Which law prohibits lenders from discriminating against applicants based on race, color, religion, national origin, sex, marital status, age, or because they receive public assistance?
Truth in Lending Act
Fair Credit Billing Act
Fair Credit Reporting Act
Equal Credit Opportunity Act
Which law requires credit card companies to provide clearer disclosures, restricts unfair interest rate increases, and protects consumers from deceptive practices?
Fair Credit Billing Act
Credit Card Accountability, Responsibility and Disclosure Act (CARD Act)
Truth in Lending Act
Equal Credit Opportunity Act
Which of the following best describes a credit report?
A summary of your income and monthly expenses
A detailed record of your borrowing and repayment history, including loans, credit cards, and payment behavior
A list of all your bank account balances
A government-issued identification document
What best describes a payday loan?
A cheap and easy source of cash
A loan based on fair practices and low penalties
Are a great way to erase debt
Are predatory and used by desperate and misinformed people
Which of the following are the three major credit bureaus in the United States?
Experian
Equifax
TransUnion
Credit Karma
FICO
Charging more than you can afford to pay off on a credit card is a safe and recommended financial strategy.
True
False
Making only the minimum payment on your credit card balance every month is a good way to save money on interest.
True
False
How is artificial intelligence (AI) changing the way credit card companies make offers to consumers?
AI predicts consumers’ spending habits and financial behavior to create personalized and more tempting credit card offers
AI ensures all consumers receive the exact same credit card offers regardless of their financial profile
AI prevents consumers from receiving any credit card offers
AI automatically pays off a consumer’s credit card balance
Richmond is home to one of the 18 Federal Reserve Banks in the US.
True
False
Which action is most likely to improve a person’s credit score?
Paying all bills on time each month
Closing old credit card accounts
Maxing out available credit limits
Applying for several new loans at once
What is the best reason to check your credit report regularly?
To look for errors or signs of identity theft or fraud
To compare your score with friends at dinner
To increase his or her credit limit automatically
To increase your credit limit automatically
It is illegal for an employer to check a potential employee's credit score.
True
False
Which of the following is an advantage of having a good credit score?
Lower insurance premiums and better loan terms
Higher interest rates on loans
Greater difficulty getting approved for credit
Limits on the number of credit cards you can open
Which factor is most likely to negatively impact your credit score?
Reviewing your credit report annually
Keeping credit card balances low
Having a long credit history
Paying bills late
What is the primary purpose of a credit report?
To summarize your borrowing and repayment history
To list your monthly income
To show your investment portfolio
To track your spending habits
Which of the following actions could help you build a positive credit history?
Ignoring your credit card statements
Making regular, on-time payments
Applying for multiple loans at once
Maxing out your credit cards
