#1
Which of the following is a characteristic of a healthy credit score?
Low debt-to-income ratio
ExplanationMaintaining a low ratio indicates manageable debt relative to income.
#2
What does APR stand for in the context of loans and credit?
Annual Percentage Rate
ExplanationIt represents the annual cost of borrowing, including interest and fees.
#3
What does FICO stand for in the context of credit scores?
Fair Issac Corporation
ExplanationIt's the company that developed the scoring model used in credit evaluation.
#4
What is bankruptcy?
A legal process for individuals or businesses unable to repay their debts
ExplanationIt provides a legal framework for managing insolvency and debt relief.
#5
What is the primary goal of financial management?
Maximizing shareholder wealth
ExplanationThe aim is to increase the value of the firm for its shareholders.
#6
Which of the following best describes the debt-to-income ratio?
The ratio of monthly debt payments to monthly income
ExplanationIt measures the proportion of income allocated to debt payments.
#7
What is the role of a credit counselor?
Providing guidance on managing debt and improving credit
ExplanationThey offer assistance in navigating debt challenges and boosting credit scores.
#8
What is the primary factor that influences an individual's credit score?
Payment history
ExplanationTimely payments demonstrate reliability in managing credit obligations.
#9
What is a common method for reducing credit card debt?
Consolidating debt with a personal loan
ExplanationCombining debts into one loan can often result in lower interest rates.
#10
What is the purpose of a debt management plan (DMP)?
To reduce debt through structured repayment plans
ExplanationIt helps individuals tackle debt by organizing payments and negotiating with creditors.