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W!se Practice Questions - Credit Flashcards | StudBud
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W!se Practice Questions - Credit
W!se Practice Questions - Credit
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Practice questions for the W!se Financial Literacy Test organized by Test Blueprint.
Flashcards
24 cards
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Answers
1
What factor can potentially contribute to a person securing a favorable interest rate on a loan?
A high income.
A good credit rating.
A college degree.
A high checking account balance.
2
An installment loan is a loan _______________________.
Used to pay for upgrades to a person’s primary residence.
Where a person makes a minimum payment monthly to keep the loan current.
That must be repaid in full within a short period of time.
Where the monthly payment is the same over the repayment period.
3
Which of the following best describes how long information typically stays on a credit report?
Positive information stays on a credit report longer than negative info.
Most negative information stays on a credit report for up to seven years.
Information stays on a credit report for a maximum of one year.
Information stays on a credit report indefinitely regardless of the impact.
4
The person with a variable interest rate on a loan can potentially expect their payment to
Fluctuate as interest rates change.
Vary based on their monthly budget.
Decrease over the life of the loan.
Remain constant over the life of the loan.
5
What is the primary difference between a loan and grant to pay for college?
Grants are based on financial need w/o repayment & loans require repayment
Loans provide funs upfront, while grants require work-study arrangements.
Grants require repayment with interest, while loans do not.
Loans are based on academic merit and grands are based on extracurriculars
6
The Truth in Lending Act is a law _______________________.
Requires lenders to disclose how customer personal information is used.
Requiring borrowers to disclose non-payment to the credit bureaus.
Prohibiting lenders from discriminating against potential borrowers.
Requires lenders to give borrowers accurate info about loan terms and costs
7
If a person makes too many late payments on a credit card, the credit card company may
Increase the credit limit to encourage responsible spending.
Reduce the interest rate to incentivize timely payments.
Request immediate payment of the full balance on the account.
Raise the interest rate, resulting in higher costs for the cardholder.
8
Which of the following represents a best practice for managing credit cards?
Paying the credit card balance in full each month to avoid interest charges
Carrying a balance on the credit card and paying only the minimum amount
Ignoring credit card statements and not making any payments.
Making only sporadic payments on the credit card balance.
9
If a person earns $50,000 a year, has total assets of $250,000 and liabilities of $140,000, their net worth is
$110,000
$50,000
$160,000
$250,000
10
What advice might best serve a person on how to manage credit cards while sticking to a budget?
Use credit cards for all purchases to earn rewards.
Set a monthly spending limit on credit cards and track expenses closely.
Max out credit card limits to build a strong credit history.
Apply for multiple credit cards to increase spending flexibility.
11
Which of the following best describes the implications of taking out a loan for the maximum term allowed?
It accelerates the repayment process, allowing room for a new loan.
It increases the monthly payments, making it easier to manage.
It minimizes the total amount of interest paid over the life of the loan.
It extends the repayment period resulting in higher overall interest costs.
12
A person can establish credit by
Avoiding all forms of borrowing to maintain a pristine credit record.
Opening multiple bank accounts to build a strong financial history.
Making timely payments on loans bills to build a positive credit history.
Accumulating debt on credit cards from multiple lenders.
13
Which of the following is an example of a revolving credit?
A student loan.
A car loan.
A credit card.
A mortgage.
14
What might a person still be responsible for when they file bankruptcy?
Mortgage payments.
Taxes.
All debts are completely forgiven.
Revolving credit balances.
15
You take a valuable item to a pawn shop and receive a cash loan in return. In this case, your item is considered...
Deposit
Collateral
Principal payment
Interest
16
Why might a lender require collateral for a loan?
To reduce the risk associated with the borrower defaulting on the loan.
To provide additional funds to the borrower.
To increase the borrower’s credit limit.
To decrease the interest rate on the loan.
17
What should a person consider before using a credit card for cash advances?
Cash advances do not affect your credit score.
Cash advances incur lower interest rates than regular purchases.
Cash advances incur higher interest rates than regular purchases.
Cash advances offer longer repayment options than regular purchases.
18
Which of the following best describes the impact on a person who co-signed a loan that was not repaid by the borrower?
Co-signer's credit score may lower & they'd be required to repay the loan.
The co-signer is not affected.
The lender will waive the loan repayment for the co-signer.
The co-signer’s credit score will increase.
19
A person has 2 credit cards. CC1 - 18% APR and CC2 - 12% APR. Monthly budget is $300. How much should they put on each?
Pay $200 on Card 1 and $100 on Card 2
Pay $150 on each card
Pay $100 on each and leave the remaining funds in their checking account
Pay $100 on Card 1 and $200 on Card 2
20
Which item is not a factor in determining a person’s credit score?
Length of credit history.
Payment history.
Income.
Credit utilization.
21
For which purpose might a person prefer to get a loan?
To increase savings.
To decrease personal debt.
To purchase a home.
To donate to charity.
22
What is APR?
The number of payments required to pay off a loan.
The cost of borrowing money annually, including interest and fees.
The total amount of money borrowed.
The amount of money earned on a deposit.
23
After graduating, what typically happens to a person who received a loan to pay for the cost of an undergraduate degree?
The loan is automatically forgiven.
The person automatically receives additional loan funds for graduate school
The person must begin making loan payments.
The person’s credit score decreases.
24
You take out a loan of $1000 over a 6-mo. period. The total of their mo. payments over this period is $1070 because
In addition to the principal, they incurred $70 in taxes on the loan.
They added a gratuity of $70 for the lender’s service.
In addition to the principal, they incurred $70 in interest on the loan.
The $70 will be added to their emergency fund.
