Good Credit

Question 1

List some positive uses of credit

Answer 1

Obtain loans at favorable rates, convenience, emergencies, own expensive products sooner, obtain an education

Question 2

List some negative uses of credit

Answer 2

Tempting to spend more money, reduces financial flexibility and buying power, buying costly items on credit that you can’t afford, interest is costly

Question 3

Define APR

Answer 3

Annual percentage rate

Question 4

What is a debt limit?

Answer 4

Overall maximum you believe you should owe based on your ability to meet repayment obligations. Debt-to-income method or Debt Payments to Disposable Income method.

Question 5

What is the purpose of usury law?

Answer 5

Establishes maximum loan amounts, interest rates, and credit-related fees for different types of small loans from various sources.

Question 6

What is a loan used to pay off all other debits and reduce the total monthly payments?

Answer 6

Debt Consolidation loan

Question 7

Summarize Fair Credit Reporting Act

Answer 7

Credit reports must only contain accurate information. It allows consumers to correct or challenge errors or omissions. Regulates consumer reporting agencies.

Question 8

Fair Credit Billing Act

Answer 8

Protects consumers from unfair billing practices and provides mechanisms for addressing billing errors.

Question 9

Equal Credit Opportunity Act

Answer 9

Creditors can’t discriminate against any applicant. If you are denied credit, they must give you a written explanation of the reasons for denial.

Question 10

Credit Card Act

Answer 10

To establish fair and transparent practices relating to the extension of credit. Must give notice of rate increases, can’t market excessively to young people. Notice of payment terms.

Question 11

What do you call an arrangement whereby you provide one monthly payment to a credit counseling agency which then distributes funds to all of your creditors?

Answer 11

Debt Management Plan

Question 12

How can you prevent unauthorized credit accounts from being opened in your name?

Answer 12

Place a security freeze on your credit

Question 13

What expresses cost of credit as a percentage rate?

Answer 13

APR - Annual Percentage Rate

Question 14

Which Act prohibits third-party debt collection agencies from using abusive, deceptive, or unfair practices to collect past-due debts?

Answer 14

Fair Debt Collections Practices Act

Question 15

Act that requires lenders to disclose to credit applicants both the interest rate expressed as an annual percentage rate and the finance charge.

Answer 15

Truth in Lending Act