#1
1. What is a credit score used for?
Assessing risk for lending money
ExplanationEvaluates the likelihood of a borrower repaying a loan.
#2
6. What is the purpose of a credit report?
To assess an individual's creditworthiness
ExplanationProvides an overview of a person's credit history and reliability.
#3
11. What does the term 'cosigner' mean in the context of credit?
A person who shares equal responsibility for a loan
ExplanationAssumes joint responsibility for repaying a loan.
#4
16. What is the Debt-to-Income Ratio used for in the context of credit assessment?
To evaluate the proportion of income used to repay debts
ExplanationAssesses the portion of income dedicated to debt repayment.
#5
21. How does a debt settlement impact your credit score?
May negatively impact the score
ExplanationSettling debts for less than owed can harm your credit.
#6
2. Which of the following factors does NOT typically impact your credit score?
Annual income
ExplanationIncome usually isn't a direct factor in credit score calculations.
#7
3. How long does negative information, such as late payments or bankruptcies, stay on your credit report?
7 years
ExplanationNegative data remains on the credit report for seven years.
#8
7. How often are individuals entitled to receive a free copy of their credit report from each of the major credit bureaus?
Once a year
ExplanationConsumers can request a free report annually from each major bureau.
#9
8. Which of the following is a soft inquiry on your credit report?
Checking your own credit score
ExplanationMonitoring your own credit score has no impact on your score.
#10
12. How does the age of credit accounts affect your credit score?
Longer credit history may positively influence the score
ExplanationA lengthier credit history can positively impact the credit score.
#11
4. What is the highest possible credit score according to the FICO scoring system?
850
ExplanationThe top FICO score achievable is 850.
#12
5. In the context of credit scores, what does 'utilization rate' refer to?
The percentage of available credit being used
ExplanationMeasures the portion of credit in use relative to the total available.
#13
9. What action may positively impact your credit score over time?
Making timely payments
ExplanationConsistently paying bills on time can boost your credit score.
#14
10. What is the purpose of a credit score range, such as 'Excellent,' 'Good,' 'Fair,' and 'Poor'?
To provide a general assessment of creditworthiness
ExplanationCategories help gauge an individual's creditworthiness level.
#15
14. What is the impact of closing a credit card account on your credit score?
May negatively affect the score
ExplanationClosing an account can impact credit utilization and, consequently, the score.