Ch. 4 Test Prep: Question Preview (ID: 27465)

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18) There are three credit bureaus: Experian, TransUnion and Equifax. 18)
a) True
b) False

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

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

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

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

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

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

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

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) 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.

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

8) Which of the following is not recommended in the debt snowball method of getting out of debt?
a) List your debts in order from smallest to largest balance and focus on paying the smallest debt off first.
b) B) Every extra dollar you get should be thrown at the largest debt first.
c) C) Attack your debt with intensity.
d) Every time you pay off a debt, you add its old minimum payment to your next debt payment.

Which of the following is the most cost-effective option for purchasing a home?
a) A) Get a 15-year mortgage with a 5% down payment.
b) 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 r
d) D) Get a 30-year mortgage with a 20% down payment.

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.

Which of the following statements is false?
a) A) Prior to the FCRA, consumers were unable to challenge errors in their credit reports.
b) B) Under FCRA, consumers are allowed to receive one free credit report every five years.
c) The U.S. Congress enacted the Fair Credit Reporting Act to address concerns over consumer credit report accuracy, privacy and
d) Under FCRA, creditors must notify consumers if they deny credit based on a credit report file, and they must also tell the co

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 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

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

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

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

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

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