Understanding Credit

Which of the following is the best definition of credit?

• A system for saving money over time.

• The ability to borrow money with the agreement to repay it later.

• The amount of money you earn annually.

• A reward for using a debit card responsibly.

What percentage of your credit score is determined by your credit utilization rate?

• 10%

• 30%

• 50%

• 70%

What happens if you apply for multiple credit cards in a short period of time?

• Your credit score remains the same.

• Your credit score may decrease due to multiple hard inquiries.

• Your credit score increases with each application.

• Your payment history is immediately affected.

Which strategy is part of the snowball method for managing debt?

• Focus on paying off the smallest debts first.

• Pay off debts with the highest interest rates first.

• Consolidate all debts into one payment.

• Delay payments to reduce monthly bills.

How can checking your credit report benefit you?

• It automatically improves your credit score.

• It allows you to identify and correct errors that may affect your credit.

• It removes negative information from your credit history.

• It increases your credit limit.

Why is having a longer credit history beneficial?

• It guarantees approval for all loans.

• It shows lenders that you have experience managing credit over time.

• It eliminates the need for a good payment history.

• It automatically increases your credit score by 100 points.

Closing an old credit card account always improves your credit score.

• True

• False

Making the minimum payment on a credit card each month is enough to build excellent credit.

• True

• False

Paying off a loan early can positively impact your credit score in some cases.

• True

• False

You can dispute errors on your credit report for free.

• True

• False