Three C's of Credit Quiz

What does "Capacity to Repay" primarily assess in the context of credit worthiness?

• The value of the borrower's assets

• The borrower's past borrowing history

• The borrower's current and future ability (income) to pay back the loan

• The borrower's personal references

Which of the following best describes "Collateral" in the context of borrowing?

• A borrower's reputation for repaying debts

• Valuable assets a borrower could leverage to secure a loan.

• The borrower's income level

• A detailed plan on how the loan will be used

Which of the following is a component of "Character" in the context of credit worthiness

• The borrower's credit score

• The borrower's educational background

• The borrower's personal savings amount

• Years living at the same residence

Which factor is NOT directly considered under the Three C's of Credit Worthiness?

• Employment history

• Credit history

• Marital status

• Income level

How does a high credit score affect an individual's borrowing capacity?

• It decreases the interest rates on loans

• It increases the amount of collateral required

• It has no effect on borrowing capacity

• It shortens the loan repayment period

Why is collateral important to lenders?

• It provides a source of repayment in case the borrower defaults on the loan

• It increases the borrower's credit score

• It decreases the lender's operational costs

• It allows the lender to charge higher interest rates

Which of the following best demonstrates a borrower's "Capacity to Repay"?

• A high-value property as collateral

• A stable job with a steady income

• A personal reference from a well-known businessperson

• A large savings account

In assessing "Character," which of the following would a lender likely consider the least?

• Credit report

• Personal references

• Social media profiles

• Educational background

Why do lenders use the Three C's to evaluate individuals creditworthiness?

• To assess likelihood that the individual will repay the loan

• To judge people for their crimes.

• To understand what customers most like to buy?

• So creditors can share your information with the government.

Your friend tells you he is about to finance a car with a 10.7% APR. How will the APR impact your friend's monthly car payments?

• The monthly payment will go down?

• The monthly payment will be higher