Unit 5

Question 1

Credit score breakdown

Answer 1

35%: Payment history 30%: How much available credit you are actually using 15%: Length of time you’ve been in debt (length of relationship with creditors 10%: How much new debt 10%: Type of debt (mortgage, credit card, etc.)

Question 2

Examples of Installment credit

Answer 2

Car loans or home loans

Question 3

Credit Score Range

Answer 3

800 to 850: Excellent Credit Score
740 to 799: Very Good Credit Score
670 to 739: Good Credit Score
580 to 669: Fair Credit Score
300 to 579: Poor Credit Score

Question 4

Snowball Method

Answer 4

Organize debt by lowest to highest and pay the smallest debt ($ value) first

Question 5

Avalanche method

Answer 5

Pay debts in order of interest rate, starting with the highest.

Question 6

Debt collector

Answer 6

a person or company hired by a creditor to collect the overdue balance on an account

Question 7

What can and can’t debt collectors do?

Answer 7

• Can contact you by phone, email, or physical mail - Cannot contact you directly at work or outside the hours of 8 am to 9pm.

Question 8

Subsidized Student Loan

Answer 8

This is a type of federal student loan on which the government pays the interest that accrues while a student
is in school.

Question 9

Unsubsidized Student Loan

Answer 9

This is a type of federal student loan on which the government does not pay the interest that accrues while a
student is in school.

Question 10

Mortgage

Answer 10

a specific type of loan that is used to buy real estate (home or other form of property)

Question 11

Revolving credit

Answer 11

an account on which the account holder can charge repeatedly up to a maximum limit, no term limit.

Question 12

Installment credit

Answer 12

a loan repaid with interest in equal periodic payments, term limit varies.

Question 13

3 C’s of Credit

Answer 13

Character, Capacity, Capital

Question 14

Character

Answer 14

honesty, willingness to pay debts, FICO credit score

Question 15

Capital

Answer 15

assets you own (collateral)

Question 16

Capacity

Answer 16

earning power and debts, work history, education

Question 17

Credit Score

Answer 17

A measure of an individual’s credit risk; calculated from a credit report using a standardized formula

Question 18

Credit Report

Answer 18

A detailed report of an individual’s credit history

Question 19

Safe Debt Rule

Answer 19

Don’t spend more than 10% of monthly income on debts.

Question 20

Debt consolidation

Answer 20

The act of combining all debts into one monthly payment, typically extending the terms and the length of time required to repay the debt.

Question 21

Secured Credit

Answer 21

Credit that is backed by a pledge of property (collateral)

Question 22

Unsecured Credit

Answer 22

Credit without collateral, such as credit cards.

Question 23

Premium

Answer 23

It’s the cost you pay (monthly, quarterly, or yearly) to maintain your insurance coverage

Question 24

Deductible

Answer 24

A deductible is the amount you pay out-of-pocket before insurance kicks in.

Question 25

Collision coverage

Answer 25

Coverage that pays to repair or replace your car if it's damaged in an accident with another vehicle or object

Question 26

Liability coverage

Answer 26

covers the property damage or injuries you may cause others in a crash

Question 27

Comprehensive coverage

Answer 27

Covers natural disasters and accidents not related to collsions