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Chapter 4 - DEBT - Financial Literacy Flashcards | StudBud
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Chapter 4 - DEBT - Financial Literacy
Chapter 4 - DEBT - Financial Literacy
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Questions
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Answers
1
If you are a victim of identity theft, you are only responsible for paying back half of the debt.
False
True
2
A credit score is intended to measure:
Your financial success
The amount of money you have in the bank
Your income level
The risk of your not repaying debt
3
A long-term rental agreement on a car; a form of secured long-term debt.
LEASE
LOAN
4
Co-signing a loan is a good way to help a friend or relative.
False
True
5
Which of the following is a sign that your identity may have been stolen?
Bank and billing statements don’t arrive on time
Your credit report shows accounts you didn’t open
All of the above
A call from a collection agency about a debt you didn’t incur
6
Which of the following is not a good idea for getting out of debt?
Sell something
Borrow money from your parents to pay for the debt
Get a part-time job or work overtime
Quit borrowing money
7
Individual acct info is removed from credit reports 7 yrs after the last activity, except Ch 7 Bankruptcy, which stays_
20 years
1 year
10 years
5 years
8
Which of the following statements is FALSE?
Congress enacted the Fair Credit Reporting Act to address concerns
FCRA sayscreditors must notify consumers if credit is denied due to credit
Under FCRA, consumers can receive one free credit report every 5 yrs
Prior to the FCRA, consumers could not to challenge errors in their credit
9
Time frame that a loan agreemt is in force & before/at the end of which the loan should either be repaid or renegotiated
Loan Financing
Loan Term
10
Which best summarizes how the use of a credit card for purchases instead of cash can change one’s spending behavior
Spending behavior DOESN'Tmatter as long as you pay off the credit card bal
People typically spend less when they know that they are earning rewards
Studies show consumers spend more when using credit as opposed to cash
Studies show no change in spending behav whether a person spends cash/cred
11
Teens are a huge target of credit card companies today.
False
True
12
A decrease or loss in value.
INFLATION
DEPRECIATION
13
The FTC is one of many U.S. federal agencies that regulate the consumer credit system and enforce laws related to it.
False
True
14
What factors affect a credit score?
ALL of the above
Duration of Debt
Type of Debt
New Debt
15
An interest rate charged during the early stages of a loan; the rate often goes up after a specified period of time.
Introductory rate
New customer fee
16
You need to have a credit card to rent a car or check in to a hotel.
False
True
17
Which of the following is not recommended in the debt snowball method of getting out of debt?
Attack your debt with intensity.
List debts from smallest to largest balance & focus on paying smallest 1st.
When you pay off a debt,add its old minimum payment to your next pymt
Every extra dollar you get should be thrown at the largest debt first
18
It is okay to use a credit card if you pay it off every month.
True
False
19
You can and should obtain a free copy of your credit report annually in order to check for any suspicious activity.
True
False
20
When a person owes more on an item (like a car or house) than it is worth, the person is said to be ________ on the loan
Secured
Upside Down
21
Which of the following is the most cost-effective option for purchasing a home?
Get a 30-year mortgage so that you can get the lowest possible payments
Get a 30-year mortgage with a 20% down payment.
Get a 15-year mortgage with a 5% down payment.
Ideally with 100% down; if that's not an option,15yr fixed, min of 10% down
22
A detailed report of an individual’s credit history.
Credit Report
Cash Flow Statement
23
You must establish credit in order to buy a house.
False
True
24
Which of the following is not a factor in determining a FICO score?
Paying cash for all purchases
Getting a personal loan from a bank
Taking out a mortgage on a house
Using credit cards
25
Cost of borrowing money on an annual basis; takes into account the interest rate and other related fees on a loan.
Annual Percentage Rate (APR)
Annual Fee
26
Which of the following is not a recommended step in the Drive Free method of purchasing a car?
Plan your purchase in advance using the sinking fund method of saving
Place your savings in a mutual fund so that your money can make more money
Start with an inexpensive car &gradually move up in car value as your save
Explore new car dealerships for the best interest rate.
27
There are three credit bureaus: Experian, TransUnion and Equifax.
True
False
28
Which of the following things cannot be done with a debit card but can be done with a credit card?
Rent a car
purchase something online
Purchase an airplane ticket
Go into debt
29
What is paycheck garnishment?
Holder of a mortgage sells the property of a homeowner for non-payment
A legal procedure for dealing with debt problems of individuals & business
A court-order that allows a lender to take $ owed directly from your paychk
Process of taking something back for failure to make payments
30
If you do not have a FICO score, what factors will determine whether or not you qualify for a mortgage?
Spending History
None of the above
You cannot get a mortgage without a credit history
History of rental and utility payments
31
Which of the following is not a credit myth?
Debt is a tool and should be used to create prosperity
Borrowing $ can have serious consequences &prevent you from building wealth
The lottery and other forms of gambling will make you rich.
You have ʺarrivedʺ financially once you get approved for a credit card.
32
A yearly fee that’s charged by the credit card company for the convenience of the credit card.
Interest rate
Annual Fee
33
A card issued by a bank that allows users to finance a purchase.
Credit Card
Debit Card
34
Preferred method of debt repayment; attack smallest debts with larges possible pymts, pay min on others until paid off
Credit Counseling
Debt Snowball
35
Fair Credit Reporting Act(FCRA)will allow any person or organization to ck your credit information without having a need
False
True
