#1
Which of the following is an example of revolving credit?
Credit card
ExplanationRevolving credit allows repeated borrowing and repayment.
#2
Which of the following is NOT a factor that affects a person's credit score?
Ethnicity
ExplanationCredit scores are based on financial behavior, not ethnicity.
#3
What is the minimum age requirement to obtain a credit card in most countries?
18 years old
ExplanationLegal age for credit card ownership in many jurisdictions.
#4
What does FICO stand for in the context of credit scoring?
Fair Isaac Corporation
ExplanationFICO is a company providing credit scoring solutions.
#5
Which of the following is a potential consequence of defaulting on a loan?
Legal action by the lender
ExplanationLenders may pursue legal action to recover defaulted amounts.
#6
What is the purpose of a credit score?
All of the above
ExplanationCredit scores assess creditworthiness for various financial purposes.
#7
What does APR stand for in the context of consumer credit?
Annual Percentage Rate
ExplanationAPR represents the yearly cost of borrowing.
#8
What is the purpose of a grace period on a credit card?
To avoid late payment penalties
ExplanationIt provides time before interest accrues on purchases.
#9
Which of the following is an advantage of leasing a car instead of buying one?
Lower monthly payments
ExplanationLeasing offers lower monthly costs compared to buying.
#10
What is the term for a type of credit that requires collateral, such as a house or car?
Secured credit
ExplanationSecured credit is backed by assets to minimize risk.
#11
What does the Debt-to-Income (DTI) ratio measure?
The amount of debt owed compared to income
ExplanationDTI assesses financial obligations relative to income.
#12
What is the purpose of a co-signer on a loan or credit application?
To share responsibility for the debt
ExplanationCo-signers guarantee repayment if the primary borrower fails.
#13
Which of the following actions can help improve a credit score?
Paying bills on time
ExplanationTimely payments demonstrate responsible credit behavior.
#14
Which of the following factors is NOT considered when calculating credit scores?
Income level
ExplanationCredit scores focus on financial behavior rather than income.
#15
What is the term for a credit report request made by an individual or entity checking their own credit report?
Soft inquiry
ExplanationSoft inquiries have no impact on credit scores and are for personal review purposes.