(A) A loan that has to be paid off every month.
(B) An arrangement by which you can buy something now, with the promise that you will pay for it in the future.
(C) A money substitute for items you cannot afford.
(D) All of the above.
2. What are the advantages of having a credit card?
(A) It takes all the worry out of buying things, because you know the money will be there when you need it.
(B) You don't have to carry cash or wonder whether someone will accept your check.
(C) It doesn't cost anything to use it
(D) All of the above.
3. Why is it important to have good credit?
(A) To be eligible for a job.
(B) To buy a car and get auto insurance.
(C) To rent an apartment or buy a house.
(D) All of the above.
4. What do lenders look for before they lend you money?
(A) Who you are dating or married to
(B) Whether or not you pay your bills on time (your credit history).
(C) What kind of car you had in high school
(D) All of the above
5. How can you build a good credit history?
(A) Only use your credit card when you know you can afford to use it.
(B) Establish other forms of credit—like a checking account, debit card and car payments—that can help demonstrate that you are responsible.
(C) Be reliable, stay within your affordable budget.
(D) All of the above.
6. How can you maintain good credit?
(A) Pay at least the minimum payments of all your bills on time.
(B) Ask your parents to pay your bills for you.
(C) Use all your available credit on all accounts.
(D) All of the above.
7. What is a credit report?
(A) A record of every purchase you've ever made with your credit card.
(B) A report indicating how many times you've applied for credit and been accepted or turned down.
(C) A record of how well you pay back your creditors and whether you pay your bills on time.
(D) All of the above.
8. What is an acceptable percentage of your income to spend on credit card bills?
(A) 0%—20%.
(B) 21%—40%
(C) 41%—60%
(D) 61%—80%.
9. Which of the following may request your credit report from a credit bureau?
(A) Insurance companies.
(B) Your employer.
(C) Your landlord.
(D) All of the above.
10. What should you do if you're having trouble paying your credit card bills?
(A) Borrow money from friends or your parents.
(B) Use another credit card to pay them off.
(C) Speak with a family member, friend, or other advisor, and work with your creditors to determine how you can best repay your obligations.
(D) All of the above.
ANSWERS:
Question 1
What is a credit card? (B) An arrangement by which you can buy something now, with the promise that you will pay for it in the future.
Reason: Credit does not have to be paid in full every month, but it’s not intended for purchases you can’t afford to pay off over time.
Question 2
What are the advantages of having a credit card? (B) You don't have to carry cash or wonder whether someone will accept your check.
Reason: A credit card doesn’t take all the worry out of buying things; after all, you have to pay back the money you borrow. And while a credit card is the ultimate in convenience, credit will usually cost you something (in the form of interest). A credit card is also more secure than cash; the most an issuer can charge you for the fraudulent use of your card is $50.
Question 3
Why is it important to have good credit? (D) All of the above.
Reason: As you can see, virtually everything you’ll want to do in the future depends on having good credit today. And a bad credit rating can cost you money; the worse your rating, the higher interest you will pay for large purchases. For example, if you have good credit, a 60-month, $18,000 loan will cost you $373.65 a month at 9% interest, for a total of $22,419.02 If your credit is bad, your interest rate goes up to 18%, costing you $457.08 a month, and $27,424.95 over the life of the loan. That’s a difference of $5,005.93!
Question 4
What do lenders look for before they lend you money? (B) Whether or not you pay your bills on time (your credit history).
Reason: Your spouse or girlfriend/boyfriend status won’t affect lenders’ decisions, but they’ll certainly take a close look at your credit history and income-to-debt ratio. You may also be scrutinized as to the length of your time at each residence and job. In other words: stability, ability, and willingness to pay count.
Question 5
How can you build a good credit history? (D) All of the above.
Reason: Having a checking account with overdraft protection, savings account, or debit card indicates that you have money and demonstrates how well you manage it. Put utilities in your own name, and pay them on time. And be sure to keep your billing address current to avoid late fees and bad marks on your credit record. Remember: Because credit cards make it easy to purchase things, it’s easy to lose track of how much you’ve spent. Pay at least the minimum due each month.
Question 6
How can you maintain good credit? (A) Pay at least the minimum payments of all your bills on time.
Reason: Having your parents pay your bills won’t teach you how to establish your own good credit habits. You need to pay at least the minimum due yourself, on time. Better yet, pay more than the minimum payment; the larger the payments, the faster you’ll be out of debt. And don’t use all your available credit; save some for emergencies.
Question 7
What is a credit report? (C) A record of how well you pay back your creditors and whether you pay your bills on time.
Reason: All credit reports contain the same basic information: name, Social Security number, current and previous addresses, details about loans and how they’ve been handled, public record information such as bankruptcies, court judgments or liens, and a list of companies that have reviewed the credit report. The three major credit reporting agencies are Equifax, Experian, and TransUnion.
Question 8
What is an acceptable percentage of your income to spend on credit card bills? (A) 0%—20%.
Reason: If you’re using more than 20% of your income for credit card bills, it may indicate that you’re overspending. Now’s the time to reduce your spending and pay off your debts.
Question 9
Which of the following may request your credit report from a credit bureau? (D) All of the above.
Reason: Insurance companies, potential employers, landlords, and virtually any type of lending institution can investigate how well you’ve paid your bills. Credit bureaus can and do make your credit history available to current and prospective creditors and employers as allowed by law.
Question 10
What should you do if you're having trouble paying your credit card bills? (C) Speak with a family member, friend, or other advisor, and work with your creditors to determine how you can best repay your obligations.
Reason: Speak with a family member, friend, or other advisor and work with your creditors to determine how you can best repay your obligations.
