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Ch. 4 Test Prep
Test Description: Test Prep
Instructions: Answer all questions to get your test result.
1) Which of the following is not a factor in determining a FICO Score?
A
Using credit cards
B
Taking out a mortgage on a house
C
Getting a personal loan from a bank
D
Paying cash for all purchases
2) Which of the following is not a good idea for getting out of debt?
A
A) Quit borrowing money
B
D) Borrow money from your parents to pay for the debt
C
C) Sell something
D
B) Get a part-time job or work overtime
3) Which of the following things cannot be done with a debit card but can be done with a credit card?
A
Purchase something online
B
Rent a car
C
Purchase an airline ticket
D
Go into debt
4) What factors affect a credit score?
A
Type of debt
B
Duration of debt
C
New debt
D
All of the above
5) Which of the following statements is false?
A
Under FCRA, creditors must notify consumers if they deny credit based on a credit report file, and they must also tell the co
B
The U.S. Congress enacted the Fair Credit Reporting Act to address concerns over consumer credit report accuracy, privacy and
C
A) Prior to the FCRA, consumers were unable to challenge errors in their credit reports.
D
B) Under FCRA, consumers are allowed to receive one free credit report every five years.
6) 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.
7) Which of the following is the most cost-effective option for purchasing a home?
A
D) Get a 30-year mortgage with a 20% down payment.
B
A) Get a 15-year mortgage with a 5% down payment.
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 r
D
B) Get a 30-year mortgage so that you can get the lowest possible payments.
8) 8) Which of the following is not recommended in the debt snowball method of getting out of debt?
A
Every time you pay off a debt, you add its old minimum payment to your next debt payment.
B
List your debts in order from smallest to largest balance and focus on paying the smallest debt off first.
C
C) Attack your debt with intensity.
D
B) Every extra dollar you get should be thrown at the largest debt first.
9) What is paycheck garnishment?
A
A court-ordered attachment that allows a lender to take monies owed directly from a borrowerʹs paycheck
B
B) Process of taking something back for failure to make payments
C
Process by which the holder of a mortgage sells the property of a homeowner who has fallen behind on payments
D
D) A legal procedure for dealing with debt problems of individuals and businesses
10) 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 consumers typically spend more when using credit as opposed to cash purchases.
C
Studies show that there is no change in spending behavior whether a person uses cash or credit.
D
C) People typically spend less when they know that they are earning credit card ʺrewards.ʺ
11) Which of the following is not a credit myth?
A
D) Borrowing money can have serious consequences and prevent you from building wealth.
B
C) Debt is a tool and should be used to create prosperity.
C
B) You have ʺarrivedʺ financially once you get approved for a credit card.
D
A) The lottery and other forms of gambling will make you rich.
12) If you do not have a FICO score, what factors will determine whether or not you qualify for a mortgage?
A
C) You cannot get a mortgage without a credit history
B
B) Amount of your down payment and employment history
C
A) History of rental and utility payments
D
D) A and B
13) 13) A credit score is intended to measure:
A
A) Your financial success
B
C) Your income level
C
B) The risk of your not repaying debt
D
D) The amount of money you have in the bank
14) 14) Which of the following is a sign that your identity may have been stolen?
A
D) All of the above
B
B) Bank and billing statements donʹt arrive on time
C
C) Your credit report shows accounts you didnʹt open
D
A) A call from a collection agency about a debt you didnʹt incur
15) 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
20 years
B
10 years
C
5 years
D
1 year
16) You must establish credit in order to buy a house.
A
True
B
False
17) If you are a victim of identity theft, you are only responsible for paying back half of the debt.
A
True
B
False
18) 18) There are three credit bureaus: Experian, TransUnion and Equifax. 18)
A
True
B
False
19) You can and should obtain a free copy of your credit report annually in order to check for any suspicious activity.
A
True
B
False
20) You need to have a credit card to rent a car or check in to a hotel.
A
True
B
False
*select an answer for all questions
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