Managing Credit

What are the two most important factors in calculating your credit score?

• Payment history and types of accounts

• Amounts owed and length of credit history

• Payment history and total debt

• Length of credit history and new credit inquiries

Heather realized she has taken out too much debt and it has started to negatively impact her ability to budget. She has decided to pay off this debt in full as soon as possible. All of the following would be beneficial strategies EXCEPT...

• Reducing spending by canceling some of her streaming subscriptions

• Taking extra shifts at work to increase her income

• Making more than the minimum required payment on her debt

• Applying for another credit card to use in case she runs out of cash paying off her debt

Which of the following statements about credit scores does this bar graph support?

• Credit scores tend to drop as you grow older because you are more likely to miss a payment at some point

• It is more difficult for young people to borrow because they have less payment history for a lender to rely upon

• When young people borrow, they are likely to have lower interest rates because their credit scores are lower

• It is easier for young people to get loans at lower interest rates because they are likely to have never been late with a payment

Your friend confides in you that he has a low credit score. What is the single best way for him to improve his score?

• Cancel his credit cards

• Make on-time payments

• Get a car loan

• Check his credit score

Melvin is 19 years old and wants to begin establishing a credit history. Which action should he take to meet that goal?

• Always say "credit" when asked "credit or debit?" at a store

• Ask his parents to cosign a credit card or add him as an authorized user on their credit card

• Any time he borrows money from a friend or family member, be sure to pay it back promptly

• Take out some private student loans, even though he doesn't need them because he has grants and scholarships

Which of the following individuals or groups would be the LEAST likely to look at your credit score?

• Someone interviewing you for a job

• Credit card companies

• An insurance company reviewing your applicant for auto insurance

• A bank representative who is helping you open a savings account

Frank and Jasmere are each shopping for a new car for themselves. Each will need a $20,000 loan that they will pay back over a five year period. Frank has a credit score of 730 and Jasmere has a score of 600. Which of the following statements is TRUE?

• 5. Over the five year period, Jasmere and Frank will pay the same amount for the car loan

• 5. Frank's monthly payment on the auto loan will be about $100 more than Jasmere's payment

• 5. Jasmere's monthly payment on the loan will be about $100 more than Frank's payment

• 5. Lenders are not allowed to charge people different interest rates based on their credit scores

Which best describes the Debt Snowball method for paying off debt?

• Only make payments on your smallest debt first, then move on to your second smallest debt, and so on

• Once your debt "snowballs" out of control, hire a certified credit counselor to help get your finances back on track

• Make the monthly minimum payments on all your debts, and then put any extra cash toward the debt with the highest balance

• Make the monthly minimum payments on all your debts, and then put any extra cash toward the debt with the lowest balance

Which of these represents a potential consequence of neglecting to pay your federal student loans?

• Wages or tax refunds can be garnished

• Passport revocation

• Driver’s license suspension

• Termination from your job

What benefits do you receive by taking out a loan with a cosigner?

• You don’t get penalized for late payments

• You get a discount on future loans after this one is paid off

• You have a better chance of getting approved and getting a lower interest rate if the cosigner has good credit

• You automatically get the same credit score as the cosigner once the loan is paid off