Understanding Consumer Credit Concepts Quiz

APR represents the annualized cost of credit, including interest and fees.

A grace period allows credit card users to make purchases without incurring interest if the full balance is paid by the due date.

Credit Utilization Ratio assesses the proportion of available credit currently in use, influencing credit scores.

Pre-qualification provides an initial assessment of an individual's suitability for a credit card, helping avoid unnecessary credit inquiries.

A secured credit card is backed by a cash deposit, providing a secured line of credit for individuals with limited or damaged credit histories.

A credit card allows continuous borrowing, with a variable balance and monthly payments.

DTI measures the proportion of income allocated to debt payments, aiding in evaluating financial risk.

An auto loan is secured by the purchased vehicle, reducing the lender's risk.

Closing a credit card may affect credit score based on changes to the credit utilization ratio.

The CFPB ensures fair lending practices and enforces the ECOA to prevent discrimination in credit transactions.

A credit freeze limits access to one's credit reports, adding a layer of security to prevent unauthorized accounts.

FICO scores gauge an individual's creditworthiness by predicting the likelihood of timely payments.

FCRA empowers consumers to challenge inaccuracies in their credit reports and ensures fair credit reporting.

A charge-off occurs when a creditor considers a debt unlikely to be collected and reports it as a loss.

A co-signer agrees to repay the loan if the primary borrower defaults, providing added security to the lender.

A subprime credit score falls within the range of 300-499, indicating higher credit risk and potential difficulty obtaining favorable credit terms.

The Act aims to protect consumers by regulating credit card practices, limiting fees, and controlling interest rate hikes.