CPB 2 CH 4 REVIEW – Flashcards

Preferred method of debt repayment; includes a list of all debts organized from smallest to largest balance; minimum payments are made to all debts except for the smallest, which is attacked with the largest possible payments A credit counseling B debt snowball

Which of the following things cannot be done with a debit card but can be done with a credit card? A Go into debt B Rent a car C Purchase something online D Purchase an airline ticket

There are three credit bureaus: Experian, TransUnion and Equifax. True False

If you do not have a FICO score, what factors will determine whether or not you qualify for a mortgage? A History of rental and utility payments B Amount of your down payment and employment history C You cannot get a mortgage without a credit history D A and B

A decrease or loss in value A inflation B depreciation

Teens are a huge target of credit card companies today. True False

Which of the following best summarizes how the use of a credit card for purchases instead of cash can change oneʹs spending behavior? A Spending behavior does not matter as long as you pay off the credit card balance each month. B Studies show that there is no change in spending behavior whether a person uses cash or credit. C People typically spend less when they know that they are earning credit card ʺrewards.ʺ D Studies show that consumers typically spend more when using credit as opposed to cash purchases.

Which of the following is NOT a factor in determining a FICO score? A Getting a personal loan from a bank B Using credit cards C Paying cash for all purchases D Taking out a mortgage on a house

If you are a victim of identity theft, you are only responsible for paying back half of the debt. True False

You can and should obtain a free copy of your credit report annually in order to check for any suspicious activity. True False

A card issued by a bank that allows users to finance a purchase A credit card B debit card

A yearly fee thatʹs charged by the credit card company for the convenience of the credit card A interest rate B annual fee

You need to have a credit card to rent a car or check in to a hotel. True False

Which of the following is a sign that your identity may have been stolen? A A call from a collection agency about a debt you didnʹt incur B Bank and billing statements donʹt arrive on time C Your credit report shows accounts you didnʹt open D All of the above

An interest rate charged to a customer during the early stages of a loan; the rate often goes up after a specified period of time A introductory rate B new customer fee

What factors affect a credit score? A Type of debt B New debt C Duration of debt D All of the above

Which of the following is not a recommended step in the Drive Free method of purchasing a car? A Plan your purchase in advance using the sinking fund method of saving. B Place your savings in a mutual fund so that your money can make more money. C Start with an inexpensive car and gradually move up in car value as your savings increases. D Explore new car dealerships for the best interest rate.

It is okay to use a credit card if you pay it off every month. True False

Which of the following is the most cost-effective option for purchasing a home? A Get a 15-year mortgage with a 5% down payment. B Get a 30-year mortgage so that you can get the lowest possible payments. C The most ideal way to buy a house is with 100% down; if that is not an option, you should get no more than a 15-year, fixed rate mortgage with a down payment of at least 10%. D Get a 30-year mortgage with a 20% down payment.

Time frame that a loan agreement is in force, and before or at the end of which the loan should either be repaid or renegotiated A loan term B loan financing

Cost of borrowing money on an annual basis; takes into account the interest rate and other related fees on a loan A APR B annual fee

A detailed report of an individualʹs credit history A credit report B cash flow statement

You must establish credit in order to buy a house. True False

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. A secured B upside down

A credit score is intended to measure: A Your financial success B The risk of your not repaying debt C Your income level D The amount of money you have in the bank

Which of the following is not a credit myth? A The lottery and other forms of gambling will make you rich. B You have ʺarrivedʺ financially once you get approved for a credit card. C Debt is a tool and should be used to create prosperity. D Borrowing money can have serious consequences and prevent you from building wealth.

Individual account information is removed from your credit report seven years after the last activity on the account, except for Chapter 7 bankruptcy, which stays on your credit report for: A 1 year B 10 years C 5 years D 20 years

A long-term rental agreement on a car; a form of secured long-term debt A loan B lease

Which of the following is not a good idea for getting out of debt? A Quit borrowing money B Get a part-time job or work overtime C Sell something D Borrow money from your parents to pay for the debt

Co-signing a loan is a good way to help a friend or relative. True False