Acct. Credit Test

Question 1

A decrease or loss in value

Answer 1

depreciation

Question 2

A detailed report of an individual’s credit history

Answer 2

Credit report

Question 3

time frame that a loan agreement is in force, and before or at the end of which the loan should either be repaid or negotiated for another term

Answer 3

loan term

Question 4

type of card issued by a bank that allows users to finance a purchase

Answer 4

Credit card

Question 5

A measure of an individual’s credit risk; calculated from a credit report using a standardize formula

Answer 5

Credit score

Question 6

A yearly fee that’s charged by the credit card company for the convenience of the credit card

Answer 6

annual fee

Question 7

preferred method of debt repayment; includes a list of all debts organized from smallest to largest balance; minimal payments are made to all debts except for the smallest, which is attacked with the largest possible payments

Answer 7

debt snowball

Question 8

True or False: You must establish credit in order to buy a house.

Answer 8

false

Question 9

True or False: If you are you victim of identity theft you are only responsible for paying back half of the debt.

Answer 9

false

Question 10

Which of the following is not a factor in determining a FICO score?

Answer 10

paying cash for all purchases

Question 11

Which of the following is not a good idea for getting out of debt?

Answer 11

borrow money from your parents to pay off the debt

Question 12

Which of the following things cannot be done with a debit card but can be done with a credit card?

Answer 12

go into debt

Question 13

What mortgage is the best mortgage to have?

Answer 13

15 year fixed mortgage

Question 14

Why is an adjustable rate mortgage a bad idea?

Answer 14

The interest rate changes based on the market conditions; your payment can become too much to pay quickly

Question 15

Explain why financing a car is a bad idea.

Answer 15

you will have payments you will need to pay interest and it depreciates overtime

Question 16

Describe the negative consequences of taking on debt. What effect can debt have on your future?

Answer 16

for as long as you owe people money you can’t pay yourself = can’t save, invest, or build wealth

Question 17

What are some things you can do to protect your personal information?

Answer 17

use a paper shredder for destroying things that use personal information, keep passwords and personal information confidential, and create strong passwords

Question 18

…is given to borrowers based on their financial resources or ability to repay the loan; the lender does not have rights to a specific asset if the loan is not repaid

Answer 18

unsecured loan

Question 19

… is usually needed when borrowing large amounts of money; if you default on the loan and your house was used as collateral, the lender would take your house

Answer 19

secured loan

Question 20

modern day loan sharks who take advantage of people and should be avoided at all costs

Answer 20

predatory lenders

Question 21

Know these four things:

Answer 21

Pay payday loans are expensive, you can get stuck in a repeat cycle, debt grows fast at these rates, and many companies have unethical debt collection practices

Question 22

A mortgage with an interest rate of that changes based on market conditions

Answer 22

adjustable rate mortgage

Question 23

when a homeowner borrows against the equity in their home and obtains monthly, tax-free payments from the lender

Answer 23

reverse mortgages

Question 24

process by which the holder of a mortgage sells the property of a homeowner who has not made interest and/or principal payments on time is stipulated in the mortgage contract

Answer 24

foreclosure

Question 25

process of a lender taking something back, like a car, for failure to make payments

Answer 25

repossession

Question 26

A legal procedure for dealing with that one individual or business cannot repay what they owe

Answer 26

bankruptcy

Question 27

A court ordered attachment that allows a lender to take monies owed directly from a borrower’s paycheck; only allowed as part of a court judgment

Answer 27

garnishment

Question 28

in a bankruptcy proceeding, a debtor can give up property (collateral) to the creditor in exchange for a clean slate

Answer 28

surrender of collateral

Question 29

broadly refers to a borrower m not being current on his or her payments

Answer 29

delinquency

Question 30

How to avoid paying interest on a credit card?

Answer 30

1. pay full bill on time

2. don’t get one

Question 31

five components of the FICO score

Answer 31

debt history, new debt, type of debt, duration of the debt, debt levels (payment, searches, credit card/mortgage/car, length of history, how much money you owe)

Question 32

cost of borrowing money on an annual basis; takes into account the interest rate and other related fees on a loan

Answer 32

annual percentage rate

Question 33

model to best predict the probability of an outcome; the likelihood that a person will pay off their debt

Answer 33

predictive modeling

Question 34

it is for the debtors and it provides liquidations of their assets

Answer 34

Chapter 7 Bankruptcy

Question 35

it is for people who repay debt overtime and slowly decrease it

Answer 35

Chapter 13 bankruptcy