Section 1 Credit Management

Question 1

In addition to not having sufficient cash to pay for a purchase, three other reasons for using credit are

Answer 1

convenience, inflation hedge, emergency fund

Question 2

If consumer reports a card stolen to the issuer, and that card is subsequently used, can the issuer hold the consumer liable for any unauthorized charges placed on the card?

Answer 2

no

Question 3

What lenders look for from a would-be borrower (the 3 Cs of credit)

Answer 3

Character (past behavior)
Capacity (income)
Capital (net worth)

Question 4

When getting a loan, one of the most important factors is the ___ to ____ ratio. Mortgage lenders generally will not approve your mortgage loan if that mortgage debt would exceed ___ of your income; and your total debt should not exceed ___ of your income

Answer 4

debt-to-income; 28%; 36%

Question 5

anti discrimination laws have abolished the use of other factors for qualifying for credit such as age, gender, sexual orientation, and ___ status.

Answer 5

Marital (note: age may matter, but if you are 62 or older you must be given as many points as someone under 62)

Question 6

When you apply for credit you must be given a response within

Answer 6

30 days (if was denied, you must be given reasons in writing OR indicate your right to an explanation)

Question 7

A credit report is a document of payment history; it does not include any info about whether or not a consumer

Answer 7

is a good or poor credit risk

Question 8

If you are denied credit, the _____ entitles you to a fair and accurate credit report

Answer 8

Fair Credit Reporting Act of 1971

Question 9

If you have been denied credit, insurance, or employment due to a credit report, you have the right to obtain…

Answer 9

a free credit report within 30 days of your denial

Question 10

If you don’t believe the facts are portrayed correctly within your credit report, you may submit your own statement to be added in file; furthermore, you can insist that all those who have requested your credit report within the last ____ be notified of any unsubstantiated or incorrect entry

Answer 10

six months

Question 11

There is a subtle difference between a regular credit account and a revolving account; what is it?

Answer 11

A regular credit account requires you to pay your balance ea month or face penalties (in the form of interest; you cannot REVOLVE the balance over several months w/o penalty); a revolving credit account is designed to revolve monthly; any payments made are first applied to interest accrued and then to principal balance

Question 12

Of the two methods to use your debit card, which is the one recommended by security experts

Answer 12

select “credit” and sign

Question 13

In most cases, losses for fraudulent use of a debit card is limited to $__ if bank notified within two business days, and $___ if notified later; if unauthorized transactions are not reported within ___ days from the date the bank statement is received, you risk unlimited loss in your checking account, to include any overdraft lines of credit.

Answer 13

$50; $500; 60 days

Question 14

Do experts recommend using your debit card for online purchases?

Answer 14

NO; should use credit cards, which offer more protection under the Fair Credit Billing Act

Question 15

Pre-paid cards are gaining in popularity and are available at over 100k retail locations; what are the two types

Answer 15

single use cards (e.g. phone card or retail store card), which can be used only at one place;
Multi-purpose cards, can be used anywhere the cards are accepted

Question 16

Multi use cards are becoming popular for the ___ million Americans who don’t have bank accounts; however, the funds are not

Answer 16

60M; not insured by the FDIC