Financial Literacy and Debt Management Quiz

Debt involves borrowing money, whereas savings accounts hold deposited money.

APR represents the yearly cost of borrowing, including interest and fees.

Defaulting occurs when a borrower doesn't meet the agreed-upon terms for repayment.

It's the smallest amount a credit card holder must pay to keep the account in good standing.

It prioritizes clearing smaller debts to gain momentum in debt repayment.

FICO is a data analytics company that developed the most commonly used credit scoring model.

Credit history reflects an individual's past borrowing and repayment behavior.

It assesses an individual's ability to manage additional debt relative to their income.

Generally, a lower ratio, such as 30% or below, is considered favorable.

It gauges how much of an individual's available credit they're using.

It combines multiple debts into a single loan with a potentially lower interest rate.

It's the time given to cardholders to pay their balance in full without accruing interest.

It focuses on clearing smaller debts first, providing a psychological boost.

Opening too many new accounts in a short time can lower a credit score.

A co-signer agrees to repay the loan if the primary borrower cannot.

It compares a company's debt to its equity, indicating its reliance on borrowed funds.

It focuses on clearing high-interest debts first to minimize overall interest payments.