Wk 17:Unit 5 TEST Managing Credit

Last updated 23 days ago

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Which two elements hold the most weight when calculating a credit score?

Payment history and account types

Payment history and total owed

Outstanding balances and credit history length

Credit history length and new account inquiries

Rachel has accumulated excessive debt that’s disrupting her budget. Which of the following strategies would NOT be helpful for paying off her debt?

Making payments above the minimum requirement

Taking on additional work to boost her income

Reducing discretionary spending like streaming subscriptions

Applying for another credit card to cover shortfalls

Jordan is considering filing for Chapter 7 bankruptcy. Before doing so, which option is LEAST advisable?

Hiring a debt settlement service

Implementing a repayment strategy like the Snowball or High-Rate Method

Creating a debt management plan

Consulting with a credit counselor

Which of the following would NOT appear on a credit report?

Details of student loan activity

History of car loan payments

Records of credit card transactions

Salary from your current job

What distinguishes Chapter 7 from Chapter 13 bankruptcy?

Both processes involve asset liquidation and stay on credit reports for 10 years

Chapter 7 involves selling assets, while Chapter 13 includes a repayment plan

Chapter 7 applies to individuals; Chapter 13 applies to businesses

Chapter 7 only removes student loan debt, while Chapter 13 eliminates all debts

What distinguishes Chapter 7 from Chapter 13 bankruptcy?

Both processes involve asset liquidation and stay on credit reports for 10 years

Chapter 7 only removes student loan debt, while Chapter 13 eliminates all debts

Chapter 7 applies to individuals; Chapter 13 applies to businesses

Chapter 7 involves selling assets, while Chapter 13 includes a repayment plan

Carla, aged 19, wants to establish a credit history. What is the best action he can take?

Borrowing small amounts from friends and repaying promptly

Always selecting “credit” when asked “credit or debit?” at stores

Asking parents to cosign or add him as an authorized user on their credit card

Taking private student loans unnecessarily

How can debt positively impact an individual’s net worth?

Debt can be used to purchase valuable assets like real estate

Debt inherently raises liabilities such as unpaid balances

Increasing debt directly improves credit scores

Spending beyond income levels improves financial status

Ethan and Sophia each need $20,000 loans for cars. Ethan’s credit score is 730, and Sophia’s is 600. Which statement is accurate?

Both will pay the same loan amount over five years

Sophia’s monthly payments will be about $100 higher

Lenders cannot set interest rates based on credit scores

Ethan’s monthly payments will be about $100 higher

Which of these lender actions is LEGAL?

Modifying loan terms without prior notice

Publicly posting someone’s credit report

Denying a loan based on the applicant’s race

Charging an interest rate exceeding 20% APR

To minimize the total interest paid on multiple debts, which repayment method should you use?

High-rate method

Making minimum payments

Snowball method

Consolidating debts into a single loan

Who is responsible for maintaining your credit records?

Individual lenders

The federal government

The Consumer Financial Protection Bureau (CFPB)

Credit reporting agencies (Equifax, Experian, TransUnion)

The “buy, borrow, die” concept primarily refers to:

The long-term nature of significant debts

Using debt strategically to reduce tax liability

Being trapped in a high-interest loan cycle

Relying on debt to achieve major milestones like homeownership

If you discover an error on your credit report, such as a false late payment, what should you do first?

Contact the creditor to request a correction

File a police report for potential identity theft

Notify the credit reporting agency

Wait to see if it resolves automatically

Which statement about bankruptcy is accurate?

It should be your first step if debt exceeds 30% of your income

It erases all debts at no cost

It remains on your credit report indefinitely

It significantly lowers your credit score

What is the role of a credit counselor?

Evaluating loan eligibility for banks

Collecting overdue debts for creditors

Cosigning loans to reduce borrower risk

Providing financial guidance and creating debt management plans

How does the Debt Snowball method work?

Hire a credit counselor if debt becomes overwhelming

Focus only on paying off the smallest debt first

Make minimum payments on all debts while prioritizing the smallest balance

Make minimum payments on all debts while prioritizing the largest balance

Which of the following may result from neglecting federal student loans?

Suspension of your driver’s license

Garnishment of wages or tax refunds

Loss of employment

Revocation of your passport

What is one advantage of having a cosigner on a loan?

Automatic adoption of the cosigner’s credit score upon repayment

Late payments do not affect your credit

Discounts on future loans become available

Easier approval and potentially lower interest rates

You’re struggling to keep up with your auto loan. Which friend’s advice could hurt your credit score?

Take a second job to make all payments

Negotiate a lower monthly payment with your lender

Stop paying your credit card bill temporarily to catch up

Cut non-essential expenses to prioritize payments

Why is it beneficial to establish credit while you’re young?

Negative credit marks are erased faster for young borrowers

A credit history is often required for renting apartments or obtaining loans

Accessing credit becomes more expensive with age

Credit scores are free for people under 25

What determines the spending limit on a secured credit card?

The amount you deposit as collateral

Your credit score

The duration of your relationship with the bank

The total balance in all bank accounts

Which government-authorized service offers free annual credit reports?

Credit Karma

WalletHub

AnnualCreditReport.com

CreditWise

How can a credit score affect your financial stability?

Only high scores qualify for loans

It influences loan approval and interest rates

Low scores result in lower loan interest rates

It has little impact on financial decisions

What is the primary relationship between a credit report and a credit score?

A credit score includes all the details of a credit report

A credit report summarizes your financial goals

A credit report calculates your credit score automatically

A credit score is determined based on the credit report’s history

Which two elements hold the most weight when calculating a credit score?

Payment history and account types

Payment history and total owed

Outstanding balances and credit history length

Credit history length and new account inquiries

Rachel has accumulated excessive debt that’s disrupting her budget. Which of the following strategies would NOT be helpful for paying off her debt?

Making payments above the minimum requirement

Taking on additional work to boost her income

Reducing discretionary spending like streaming subscriptions

Applying for another credit card to cover shortfalls

Jordan is considering filing for Chapter 7 bankruptcy. Before doing so, which option is LEAST advisable?

Hiring a debt settlement service

Implementing a repayment strategy like the Snowball or High-Rate Method

Creating a debt management plan

Consulting with a credit counselor

Which of the following would NOT appear on a credit report?

Details of student loan activity

History of car loan payments

Records of credit card transactions

Salary from your current job

What distinguishes Chapter 7 from Chapter 13 bankruptcy?

Both processes involve asset liquidation and stay on credit reports for 10 years

Chapter 7 involves selling assets, while Chapter 13 includes a repayment plan

Chapter 7 applies to individuals; Chapter 13 applies to businesses

Chapter 7 only removes student loan debt, while Chapter 13 eliminates all debts

What distinguishes Chapter 7 from Chapter 13 bankruptcy?

Both processes involve asset liquidation and stay on credit reports for 10 years

Chapter 7 only removes student loan debt, while Chapter 13 eliminates all debts

Chapter 7 applies to individuals; Chapter 13 applies to businesses

Chapter 7 involves selling assets, while Chapter 13 includes a repayment plan

Carla, aged 19, wants to establish a credit history. What is the best action he can take?

Borrowing small amounts from friends and repaying promptly

Always selecting “credit” when asked “credit or debit?” at stores

Asking parents to cosign or add him as an authorized user on their credit card

Taking private student loans unnecessarily

How can debt positively impact an individual’s net worth?

Debt can be used to purchase valuable assets like real estate

Debt inherently raises liabilities such as unpaid balances

Increasing debt directly improves credit scores

Spending beyond income levels improves financial status

Ethan and Sophia each need $20,000 loans for cars. Ethan’s credit score is 730, and Sophia’s is 600. Which statement is accurate?

Both will pay the same loan amount over five years

Sophia’s monthly payments will be about $100 higher

Lenders cannot set interest rates based on credit scores

Ethan’s monthly payments will be about $100 higher

Which of these lender actions is LEGAL?

Modifying loan terms without prior notice

Publicly posting someone’s credit report

Denying a loan based on the applicant’s race

Charging an interest rate exceeding 20% APR

To minimize the total interest paid on multiple debts, which repayment method should you use?

High-rate method

Making minimum payments

Snowball method

Consolidating debts into a single loan

Who is responsible for maintaining your credit records?

Individual lenders

The federal government

The Consumer Financial Protection Bureau (CFPB)

Credit reporting agencies (Equifax, Experian, TransUnion)

The “buy, borrow, die” concept primarily refers to:

The long-term nature of significant debts

Using debt strategically to reduce tax liability

Being trapped in a high-interest loan cycle

Relying on debt to achieve major milestones like homeownership

If you discover an error on your credit report, such as a false late payment, what should you do first?

Contact the creditor to request a correction

File a police report for potential identity theft

Notify the credit reporting agency

Wait to see if it resolves automatically

Which statement about bankruptcy is accurate?

It should be your first step if debt exceeds 30% of your income

It erases all debts at no cost

It remains on your credit report indefinitely

It significantly lowers your credit score

What is the role of a credit counselor?

Evaluating loan eligibility for banks

Collecting overdue debts for creditors

Cosigning loans to reduce borrower risk

Providing financial guidance and creating debt management plans

How does the Debt Snowball method work?

Hire a credit counselor if debt becomes overwhelming

Focus only on paying off the smallest debt first

Make minimum payments on all debts while prioritizing the smallest balance

Make minimum payments on all debts while prioritizing the largest balance

Which of the following may result from neglecting federal student loans?

Suspension of your driver’s license

Garnishment of wages or tax refunds

Loss of employment

Revocation of your passport

What is one advantage of having a cosigner on a loan?

Automatic adoption of the cosigner’s credit score upon repayment

Late payments do not affect your credit

Discounts on future loans become available

Easier approval and potentially lower interest rates

You’re struggling to keep up with your auto loan. Which friend’s advice could hurt your credit score?

Take a second job to make all payments

Negotiate a lower monthly payment with your lender

Stop paying your credit card bill temporarily to catch up

Cut non-essential expenses to prioritize payments

Why is it beneficial to establish credit while you’re young?

Negative credit marks are erased faster for young borrowers

A credit history is often required for renting apartments or obtaining loans

Accessing credit becomes more expensive with age

Credit scores are free for people under 25

What determines the spending limit on a secured credit card?

The amount you deposit as collateral

Your credit score

The duration of your relationship with the bank

The total balance in all bank accounts

Which government-authorized service offers free annual credit reports?

Credit Karma

WalletHub

AnnualCreditReport.com

CreditWise

How can a credit score affect your financial stability?

Only high scores qualify for loans

It influences loan approval and interest rates

Low scores result in lower loan interest rates

It has little impact on financial decisions

What is the primary relationship between a credit report and a credit score?

A credit score includes all the details of a credit report

A credit report summarizes your financial goals

A credit report calculates your credit score automatically

A credit score is determined based on the credit report’s history