#1
What is a credit score?
A numerical representation of a person's creditworthiness
ExplanationCredit score represents one's creditworthiness numerically.
#2
What is the purpose of a credit limit?
To limit the amount of credit available to a borrower
ExplanationCredit limit restricts available credit for a borrower.
#3
What is the debt-to-income ratio?
The percentage of income spent on debt payments
ExplanationDebt-to-income ratio reflects the portion of income allocated to debt payments.
#4
What is a co-signer in a credit agreement?
Someone who guarantees repayment if the borrower fails to pay
ExplanationA co-signer ensures repayment if the borrower defaults.
#5
What is the Fair Credit Reporting Act (FCRA) in the United States?
A law that regulates the collection, dissemination, and use of consumer credit information
ExplanationFCRA governs the handling of consumer credit information.
#6
What does 'debt consolidation' involve?
Paying off multiple debts by taking out a new loan
ExplanationDebt consolidation entails clearing multiple debts with a single loan.
#7
What does APR stand for in relation to credit?
Annual Percentage Rate
ExplanationAPR signifies the Annual Percentage Rate.
#8
What is the impact of a late payment on a credit score?
Decrease in credit score
ExplanationLate payments typically lower credit scores.
#9
What does 'credit utilization ratio' refer to?
The amount of available credit being used
ExplanationCredit utilization ratio indicates the extent of credit being utilized.
#10
What is the difference between a secured loan and an unsecured loan?
Collateral
ExplanationSecured loans require collateral, while unsecured loans don't.
#11
What is the purpose of a credit counseling service?
To provide financial education and assistance with debt management
ExplanationCredit counseling offers financial education and debt management aid.
#12
What is the role of a credit report in the credit evaluation process?
To assess the risk of lending to an individual
ExplanationCredit report evaluates the lending risk associated with an individual.
#13
What is a secured credit card?
A credit card that requires collateral
ExplanationSecured credit cards need collateral for issuance.
#14
What is a grace period on a credit card?
The time during which no interest is charged on new purchases
ExplanationGrace period exempts interest on new purchases for a certain duration.
#15
What is the significance of the Equal Credit Opportunity Act (ECOA)?
It prohibits discrimination in lending based on race, color, religion, national origin, sex, marital status, age, or receipt of public assistance
ExplanationECOA bans lending discrimination based on various factors.
#16
What is the purpose of a credit monitoring service?
To alert individuals to changes in their credit reports
ExplanationCredit monitoring services notify individuals of credit report alterations.
#17
What does 'rebuilding credit' involve?
Paying off debts and managing credit responsibly to improve credit scores
ExplanationRebuilding credit entails debt clearance and responsible credit management for score enhancement.