5.5 Credit Scores

Which of the following statements best describes the relationship between credit scores and credit riskiness of borrowers?

• Higher credit scores are associated with higher credit risk

• Higher credit scores are associated with lower credit risk

• Lower credit scores are associated with lower credit risk

• Credit scores and credit risk are unrelated

Which of the following is NOT used to estimate a credit score?

• Marital status

• Age

• New credit inquiries

• Both age and marital are correct

When reviewing personal information, which of following is included in credit-scoring models?

• Gender of individual

• Race of individual

• Public record information

• All of the answer choices are correct

Which of the following credit inputs is the least important when a FICO score is developed?

• Length of credit history

• Amount of credit

• Payment history

• Types of credit

Raul has had a credit card since college. Overall, he has managed his credit history well, although he has occasionally made a late payment on his credit card. Given this information, which of the following FICO scores is Raul likely to recieve?

• 350

• 825

• 640

• 790

Individuals with low credit scores are more likely to be:

• Charged higher interest rates on loans

• Offered new low-cost credit cards

• Charged higher insurance premiums

• Charged higher interest rates on loans and pay higher insurance premiums

All of the following statements regarding credit inquires are true, EXCEPT:

• Hard credit inquiries generally have a negative impact on credit scores

• Soft credit inquiries generally do not affect credit scores

• When an individual requests his or her own credit report, it is considered a hard inquiry

• Hard credit inquiries generally have a negative impact on credit scores, but soft credit inquiries generally have no effect

Which of the following events can lead to a lower credit score?

• Filing for bankruptcy

• Making one or more late payments

• Frequently moving residences

• All of the answer choices are correct

If you find a mistake in your credit report, which of the following may you add to your credit report?

• A 100-word statement describing the mistake

• A letter notifying all creditors of your displeasure with your score

• A 1,000-word rebuttal of the score

• A proposed resolution of the mistake

The FICO score has been the standard model for developing credit scores. for many years; however, new credit-scoring models are being developed. In relation to this, which of the following statements is TRUE?

• Because of multiple credit-scoring models, consumers have a difficult time knowing which behaviors matter most when trying to improve credit scores

• Multiple credit-scoring models make it much more improve credit scores

• Multiple credit-scoring models make it more difficult for individuals who have never had credit to receive a loan for the first time

• The same good credit behaviors, such as on-time payments and low debt-to-credit ratios, will lead to good credit scores regardless of the credit-scoring model