credit union

Question 1

The maximum amount you are allowed to charge on your account is the
a. Quota
b. account ceiling
c. credit limit
d. maximum purchase

Answer 1

c. credit limit

Question 2

What is credit?
a. the option to purchase things and pay for them later, usually with interest
b. the interest paid on an item bought with a credit card
c. the cost of interest and fees over the life of the loan
d. the report used to decide whether or not to extend a loan

Answer 2

The option to purchase things and pay for them later, usually with interest.

Question 3

Which of the following do not involve interest payments on purchases?
a. personal loans
b. credit cards
c. debit cards
d. title loans

Answer 3

Debit cards

Question 4

Which of the following has a maximum credit limit that can be used for multiple purchases and can be paid back over time?
a. title loans
b. credit cards
c. mortgage
d. paycheck loan

Answer 4

Credit Cards

Question 5

Which of the following have the highest interest rates?
a. personal loans
b. credit cards
c. student loans
d. payday loans

Answer 5

Payday loans

Question 6

Which of the following is not considered when determining a credit score?
a. payment history
b. previous jobs
c. types of credit
d. credit utilization

Answer 6

Previous jobs

Question 7

What is the highest possible credit score?
a. 425
b. 675
c. 850
d. 1000

Answer 7

850

Question 8

Which of the following is one of the Five C’s of Credit?
a. Convenience
b. Character
c. Consistency
d. Calculation

Answer 8

Character

Question 9

The financial ability to repay a loan with present income
a. Character
b. Collateral
c. Capital
d. Capacity

Answer 9

Capacity

Question 10

A business that accumulates, stores, and sells credit information to business subscribers
a. payday lender
b. Credit union
c. credit bureau
d. pawnbroker

Answer 10

Credit bureau

Question 11

Which of the following is true about credit reports?
a. they list payment history and debt levels
b. they are used to determine taxes owed
c. they are prepared once every five years
d. they are only available to financial institution

Answer 11

They list payment history and debt levels

Question 12

The frequency of payment of installment loans is usually
a. Daily
b. Weekly
c. Monthly
d. Quarterly

Answer 12

Monthly

Question 13

Which of the following debts is not erased by bankruptcy?
a. child support
b. credit card purchases
c. medical bills
d. car loans

Answer 13

Child support

Question 14

Which of the following is true about bankruptcy?
a. it requires a legal action to remove debt.
b. it has no effect on a person’s credit history
c. it is only available to those with a high income
d. it is considered a crime punishable by prison

Answer 14

It requires a legal action to level action to remove debt

Question 14

A loan that is backed by something of value pledged to ensure payment is a
a. non-secured loan
b. secured loan
c. signature loan
d. none of these

Answer 14

secured loan

Question 15

Which of the following is considered to be open-ended credit?
a. department store charge cards
b. a mortgage
c. a car loan
d. installment loans

Answer 15

Department store charge cards

Question 15

The information that a lender must disclose to consumers applying for a cash loan is
a. the formula for compounded interest
b. the annual percentage rate (APR) and/or the finance charge
c. full dollar amount being paid back on the loan over its life
d. the tax obligations

Answer 15

The annual percentage rate (APR) and/or the finance charge

Question 16

A person’s debt ratio shows the percentage between the debt and net worth. The lower the ratio the
a. better off financially the person is
b. worse off financially the person is
c. more liquid assets the person has
d. less liquid assets the person has

Answer 16

better off financially the person is

Question 17

When a person brings an item to a pawnshop to obtain cash, the transaction is considered
a. a collateralized loan
b. a custodial payment
c. an unsecured loan
d. a sales agreement

Answer 17

A collateralized loan

Question 18

When a person declares bankruptcy, that fact will appear on the person’s credit report
a. for a 3 year period
b. until the person repays all the debts owed
c. for a 10 year period
d. until the person is able to receive a new credit card

Answer 18

for a 10 year period

Question 19

What is the best way to improve a bad credit history?
a. apply for additional credit cards
b. pay off the lowest interest rate cards first
c. use credit cards instead of paying with cash
d. pay more than the monthly minimum payment

Answer 19

Pay more than the monthly minimum payment

Question 20

The act known for its provisions requiring full disclosure of all charges in a credit transaction is called the
a. Fair Credit Reporting Act
b. Fair Credit Billing Act
c. Truth in Lending Act

Answer 20

Truth in lending act

Question 21

Which of the following is a benefit of credit cards?
a. The convenience of buying now and paying later
b. The ability to spend unlimited money
c. No interest fees on unpaid credit balances
d. No impact on your ability to receive loans

Answer 21

The convenience of buying now and paying later

Question 22

The wise use of credit involves comparing the various offers of credit to determine the
a. Affiliated banks
b. Total costs
c. Yearly taxes
d. Company sponsors

Answer 22

Total cost

Question 23

Individuals can verify the accuracy of their credit histories by reviewing a __________ that is obtained from a __________________. a. Credit certificate; credit union b. Bank statement; financial institution c. Lending statement; tax agency d. Credit report; credit bureau

Answer 23

Credit report; Credit bureau

Question 24

Interest paid on a loan can be understood as compensation to ____________ for _________________. a. The borrower; spending now rather than later b. The borrower; repaying on time c. The lender; avoiding bad investments d. The lender; taking a risk

Answer 24

The lender; taking a risk

Question 25

What are the two most important factors in calculating your credit score? a. Payment history and types of accounts b. Amounts owed and length of credit history c. Payment history and amounts owed

Answer 25

Payment histor and amounts owed

Question 26

All of the following would show up on a credit report EXCEPT... a. Salary of your current job b. Payment history of your car loan c. Credit card payment history d. Student loan activity

Answer 26

Salary of your current job

Question 27

Your friend confides in you that he has a low credit score. What is the single best way for him to improve his credit score? a. Cancel his credit cards b. Make on-time payments c. Get a car loan d. Check his credit score

Answer 27

Make on time payments

Question 27

Your friend confides in you that he has a low credit score. What is the single best way for him to improve his credit score? a. Cancel his credit cards b. Make on-time payments c. Get a car loan d. Check his credit score

Answer 27

Make on time payments

Question 28

Melvin is 19 years old and wants to begin establishing a credit history. Which action should he take to meet that goal? a. Always say “credit” when asked “credit or debit?” at a store b. Ask his parents to cosign a credit card or add him as an authorized user on their credit card c. Any time he borrows money from a friend or family member, be sure to pay it back promptly d. Take out some private student loans, even though he doesn’t need them because he has grants and scholarships

Answer 28

B

Question 29

Which of the following individuals or groups would be the LEAST likely to look at your credit score? a. Employers b. Credit card companies c. Auto insurers d. A bank representative who is helping you open a savings account

Answer 29

D

Question 30

You have a credit card and want to know the best way to use it to boost your credit score. Which step will have the greatest impact? a. Using less than 30% of the credit limit on your card and paying it off in full every month by the due date. b. Always carry a balance from month to month. c. Make the minimum payment required on your credit card every month by the due date. d. Put the credit card in a drawer and don’t ever use it.

Answer 30

A

Question 31

I forgot to pay my credit card bill one month. For how long with that payment information show up on my credit report? a. Once I make the payment, it will disappear b. One year c. Seven years d. Ten years

Answer 31

seven years

Question 32

5 Which of the following could have a NEGATIVE impact on your credit score? a. Paying your bills on time b. Paying down the balances on your credit card accounts c. Decreasing your utilization of credit d. Applying for multiple credit cards in a short period of time (e.g., a week)

Answer 32

D

Question 33

Which best describes the Debt Snowball method for paying off debt? a. Only make payments on your smallest debt first, then move on to your second smallest debt, and so on... b. Once your debt “snowballs” out of control, hire a certified credit counselor to help get your finances back on track. c. Make the monthly minimum payments on all your debts and put any extra cash toward the debt with the highest balance. d. Make the monthly minimum payments on all your debts and put any extra cash toward the debt with the lowest balance.

Answer 33

Make the monthly minimum payments on all your debts and put any extra cash toward the debt with the lowest balance.

Question 34

Which of these represents a potential consequence of neglecting to pay your credit card or loan debts? a. Wages or tax refunds can be garnished b. Lender can file bankruptcy on your behalf c. Collection agencies begin visiting your friends and family to collect your debt d. You lose your job

Answer 34

Wages or tax refunds can be garnished

Question 35

Which statement best describes why payday loans are sometimes referred to as “predatory lending?” a. Competition to qualify for these loans is fierce, like a predator. b. The salespeople who work at these locations are often mean and unfriendly. c. Lenders “prey” on low-income borrowers who have little to no other options for obtaining a loan. d. “Predatory lending” is an official category the government uses to describe these particular types of loans, based on their fine print.

Answer 35

Lenders “prey” on low-income borrowers who have little to no other options for obtaining a loan

Question 36

Which response best completes the sentence “It’s best to begin establishing credit when you’re young because __________”? a. Interest rates will only continue to go up as you get older. b. You need a credit history and report to qualify for Federal student loans. c. Credit scores are free for anyone under the age of 25. d. You will likely need a credit history to rent your first apartment, finance your first car, or open an unsecured credit card.

Answer 36

You will likely need a credit history to rent your first apartment, finance your first car, or open an unsecured credit card.

Question 37

According to the Equal Credit Opportunity Act, which of the following factors CAN a lender legally use to charge you a higher interest rate? a. Your age, if you’re under 21 b. Your credit score c. The percentage of your income that comes from Social Security payments d. Your marital status, if you’re single

Answer 37

your credit score