Question 1

If your monthly before-tax income is $2,000 and your monthly take-home pay is $1,500, your maximum monthly consumer credit payments should not exceed:

Accepted Answer

A)  $600.
B)  $450.
C)  $400.
D)  $300.
E)  $200. D

Question 2

James finds it difficult to manage credit but wants the convenience of using a credit card. He wants to get a card that will provide direct access to his checking account. James should get a:

Accepted Answer

A)  retail charge card.
B)  gift card.
C)  student credit card.
D)  debit card.
E)  membership card. D

Question 3

A(n)_____ is a type of reporting agency that collects and sells credit information about individual borrowers.

Accepted Answer

A)  credit bureau
B)  consumer bureau
C)  insurance company
D)  bank
E)  credit scoring house A

Question 4

Russ and Lois have a home valued at $96,000 with an outstanding mortgage of $60,000. If their lender is willing to provide a home equity loan of up to 75% of the market value of the home, how much can they borrow using a home equity loan?

Accepted Answer

A)  $0
B)  $12,000
C)  $27,000
D)  $28,000
E)  $36,000

Question 5

Families that have a steady source of income and a reasonable chance to repay debts would choose Chapter 13 rather than Chapter 7 of the U.S. Bankruptcy Code.

Accepted Answer

A) True 
 B)False

Question 6

A payment made using a(n)_____ is equivalent to paying by cash.

Accepted Answer

A)  retail credit card
B)  debit card
C)  affinity card
D)  reward card
E)  student credit card

Question 7

A Chapter 7 bankruptcy filing would result in the discharge of most of your debts.

Accepted Answer

A) True 
 B)False

Question 8

The purpose of a credit investigation is to evaluate the kind of risk you pose to the lender.

Accepted Answer

A) True 
 B)False

Question 9

It is good to use credit for:

Accepted Answer

A)  buying groceries.
B)  dining at a restaurant.
C)  buying a car.
D)  visiting a tourist destination.
E)  paying rent for your home.

Question 10

With a bank credit card, you can often avoid interest charges if:

Accepted Answer

A)  the account balance is paid in full every month.
B)  at least half the account balance is paid every month.
C)  the minimum payment is made every month.
D)  the account is a revolving credit account.
E)  the account balance is below the credit limit.

Question 11

_____ is a reason that people use credit.

Accepted Answer

A)  Being able to increase disposable income
B)  Being able to provide payments for living beyond one's means
C)  Being able to afford impulse purchases
D)  Greater affordability for a luxurious lifestyle
E)  Being able to meet a financial emergency

Question 12

Which of the following cards is issued as a form of credit by department stores and oil companies?

Accepted Answer

A)  A debit card
B)  A student credit card
C)  A retail charge card
D)  An affinity card
E)  A reward card

Question 13

As a percent of take-home pay, monthly consumer credit payments should not exceed:

Accepted Answer

A)  25%.
B)  20%.
C)  15%.
D)  10%.
E)  5%.

Question 14

When canceling a credit card, you should cut up the card and _____ that you are canceling your account.

Accepted Answer

A)  inform the issuer in writing
B)  call to inform the issuer
C)  inform the credit bureau in writing
D)  call to inform the credit bureau
E)  inform the future lender in writing

Question 15

Retail charge cards are cheaper than credit cards provided by financial institutions.

Accepted Answer

A) True 
 B)False

Question 16

_____ are the credit cards issued in conjunction with a sponsoring group-most commonly some type of charitable, political, or professional organization.

Accepted Answer

A)  Affinity cards
B)  Retail charge cards
C)  Collateralized credit cards
D)  Reward credit cards
E)  Secured credit cards

Question 17

Nancy's take-home income is $3,000 per month, and she currently has a $700 monthly consumer debt. Which of the following statements applies to Nancy's ability to handle additional debt?

Accepted Answer

A)  Nancy cannot take on additional consumer debt because her debt safety ratio is higher than the lenders' guidelines.
B)  Nancy can take on additional consumer debt because her debt safety ratio is higher than the lenders' guidelines.
C)  Nancy cannot take on additional consumer debt because her debt safety ratio is lower than the lenders' guidelines.
D)  Nancy can take on additional consumer debt because her debt safety ratio is lower than the experts' guidelines.
E)  Nancy cannot take on additional consumer debt because her debt safety ratio is lower than the experts' guidelines.

Question 18

Most of your debts would be totally discharged under Chapter _____ of the federal bankruptcy law.

Accepted Answer

A)  7
B)  13
C)  12
D)  9
E)  15

Question 19

To establish credit, you should first:

Accepted Answer

A)  open savings and checking accounts.
B)  use credit extensively.
C)  arrange for a small loan.
D)  pay cash for all purchases.
E)  arrange for a large loan from close relatives.

Question 20

Which of the following will lead to a poor credit rating?

Accepted Answer

A)  Opening checking and savings accounts
B)  Opening and using a charge account
C)  Applying for a long-term loan and occasionally being late with a payment
D)  Making payments ahead of schedule
E)  Discussing with the lender if you foresee difficulty in making a payment

Exam 6: Using Credit

If your monthly before-tax income is $2,000 and your monthly take-home pay is $1,500, your maximum monthly consumer credit payments should not exceed:

James finds it difficult to manage credit but wants the convenience of using a credit card. He wants to get a card that will provide direct access to his checking account. James should get a:

A(n) _____ is a type of reporting agency that collects and sells credit information about individual borrowers.

Russ and Lois have a home valued at $96,000 with an outstanding mortgage of $60,000. If their lender is willing to provide a home equity loan of up to 75% of the market value of the home, how much can they borrow using a home equity loan?

Families that have a steady source of income and a reasonable chance to repay debts would choose Chapter 13 rather than Chapter 7 of the U.S. Bankruptcy Code.

A payment made using a(n) _____ is equivalent to paying by cash.

A Chapter 7 bankruptcy filing would result in the discharge of most of your debts.

The purpose of a credit investigation is to evaluate the kind of risk you pose to the lender.

It is good to use credit for:

With a bank credit card, you can often avoid interest charges if:

_____ is a reason that people use credit.

Which of the following cards is issued as a form of credit by department stores and oil companies?

As a percent of take-home pay, monthly consumer credit payments should not exceed:

When canceling a credit card, you should cut up the card and _____ that you are canceling your account.

Retail charge cards are cheaper than credit cards provided by financial institutions.

_____ are the credit cards issued in conjunction with a sponsoring group-most commonly some type of charitable, political, or professional organization.

Nancy's take-home income is $3,000 per month, and she currently has a $700 monthly consumer debt. Which of the following statements applies to Nancy's ability to handle additional debt?

Most of your debts would be totally discharged under Chapter _____ of the federal bankruptcy law.

To establish credit, you should first:

Which of the following will lead to a poor credit rating?