6. Using Credit
6. Using Credit
6. Using Credit
6. Using Credit
Copyright Cengage Learning. Powered by Cognero.
Page 23
e. withdraw from the credit bureau.
56. Which of the following statements about credit scoring systems is true?
a. Lower credit scores are better than higher credit scores.
b. The credit scoring system is based on extensive statistical studies.
c. Credit unions calculate and sell credit scores to lenders.
d. FICO scores consider age, gender, marital status, and so on.
e. Strength in key personal traits shows that you are a good risk for lenders and reduce your credit score.
57. Which of the following is not requested in a typical credit card application?
a. Charge accounts
b. Housing
c. Employment
d. Income
e. Political affiliations
6. Using Credit
6. Using Credit
6. Using Credit
Copyright Cengage Learning. Powered by Cognero.
Page 26
62. When canceling a credit card, you should cut up the card and _____ that you are canceling your account.
a. inform the issuer in writing
b. call to inform the issuer
c. inform the credit bureau in writing
d. call to inform the credit bureau
e. inform the future lender in writing
63. Chapter 7 of the bankruptcy code:
a. restores all the losses incurred by the borrower.
b. results in the loss of all of one’s assets.
c. requires the debtor to pay back the debt in the future.
d. sells only the home of the borrower.
e. eliminates most of the financial obligations of the borrower.
64. A straight bankruptcy:
6. Using Credit
Copyright Cengage Learning. Powered by Cognero.
Page 27
e. allows a debtor to retain some other personal assets as per federal regulations.
65. Which of the following is an example of phishing?
a. Using bills in the trash to obtain others’ personal information
b. Rerouting bills to a different address
c. Getting information from financial institutions under false pretenses
d. Stealing wallets
e. Pretending to be an employee of a financial institution
66. Which of the following modes of identity theft involves thieves obtaining your personal information from financial
institutions and other sources under false pretenses?
a. Dumpster diving
b. Skimming
c. Phishing
d. Pretexting
e. Old-fashioned stealing
6. Using Credit
6. Using Credit
Copyright Cengage Learning. Powered by Cognero.
Page 29
69. A proper use of open account credit would be to buy:
a. food.
b. a washing machine.
c. expensive wine.
d. a designer purse.
e. jigsaw puzzles.
70. Most lenders immediately will _____ the first time that you have difficulty meeting your loan payments.
a. double your interest rate
b. file a legal case
c. grant an extension
d. erase your debt
e. repossess the property you purchased
6. Using Credit
6. Using Credit
Copyright Cengage Learning. Powered by Cognero.
Page 31
73. A frequent flyer card can be aptly classified as a(n):
a. reward card.
b. affinity card.
c. retail charge card.
d. cash advance.
e. student card.
74. _____ are the credit cards issued in conjunction with a sponsoring group—most commonly some type of charitable,
political, or professional organization.
a. Affinity cards
b. Retail charge cards
c. Collateralized credit cards
d. Reward credit cards
e. Secured credit cards
75. Credit offered in the form of _____ is most common in department and clothing stores and other high-volume outlets,
where customers are likely to make several purchases each month.
a. collateralized credit cards
b. reward credit cards
c. affinity cards
6. Using Credit
Copyright Cengage Learning. Powered by Cognero.
Page 32
d. retail charge cards
e. student credit cards
76. The decision about whether or not to grant you credit will be made by:
a. individual creditors.
b. local credit bureaus.
c. the credit cardholder.
d. the Federal Trade Commission.
e. national credit bureaus.
77. If a borrower has a high FICO score, then there is:
a. a minimal chance of his or her loan getting approved.
b. no chance of his or her loan getting approved.
c. a high chance of his or her loan getting approved.
d. a high chance of more collateral requirements for his or her loan.
e. a high chance that a higher interest rate will be charged.
6. Using Credit
Copyright Cengage Learning. Powered by Cognero.
Page 33
78. The most expensive method for determining finance charges on revolving credit would be the:
a. average daily balance (ADB) method including new purchases.
b. average daily balance (ADB) method excluding new purchases.
c. annual percentage rate (APR) method including new purchases.
d. annual percentage rate (APR) method excluding new purchases.
e. annual percentage rate (APR) method excluding new purchases for student cards.
79. The FICO credit scoring system assigns points according to:
a. amounts owed.
b. marital status.
c. employment history.
d. salary.
e. where you live.
6. Using Credit
6. Using Credit
Copyright Cengage Learning. Powered by Cognero.
Page 35
82. _____ involves some type of debt restructuring by establishing a debt repayment schedule.
a. The Wage Earner Plan
b. Straight bankruptcy
c. Pretexting
d. Phishing
e. Skimming
83. Most of your debts would be totally discharged under Chapter _____ of the federal bankruptcy law.
a. 7
b. 13
c. 12
d. 9
e. 15
84. If you are expecting difficulties in making your payments, it is recommended that you:
a. talk to the creditors.
b. declare bankruptcy.
c. file a legal complaint.
6. Using Credit
Copyright Cengage Learning. Powered by Cognero.
Page 36
d. obtain more credit.
e. transfer your debt to another creditor.
85. Lindsey has a job with a monthly take-home pay of $3,500. Using the lender’s guidelines for maximum debt safety
ratio, what maximum debt burden per month can she assume? (Show all work.)
86. Ted and Karen have a combined take-home income of $4,500. Their total monthly payment on consumer debt is $875.
What is their debt safety ratio? Are they exhibiting any signs of approaching credit problems?
6. Using Credit
Copyright Cengage Learning. Powered by Cognero.
Page 37
DATE MODIFIED: 10/31/2018 7:37 AM
87. The market value of your house is $175,000, and you have a first mortgage balance of $100,000. If a lender requires
an 80% loan-to-market value ratio, how large could your home equity loan be?
88. You have a $926 balance on your credit card account. The minimum payment on your account is 2% of the latest
balance or $20, whichever is greater. What will be the minimum payment this month?