#1
What does 'APR' stand for in the context of credit?
Annual Percentage Rate
ExplanationAnnual interest rate including fees charged for a loan.
#2
What is the purpose of a 'cosigner' on a loan or credit application?
To share the responsibility of repaying the debt
ExplanationAssumes responsibility if the borrower defaults.
#3
What is the significance of the 'grace period' on a credit card?
The time period during which interest is not charged on new purchases
ExplanationAllows for interest-free repayment of new purchases.
#4
What is the 'minimum payment' on a credit card statement?
The smallest amount you can pay to avoid late fees
ExplanationLowest amount to keep the account current.
#5
What is the 'prime rate' in the context of credit?
The benchmark interest rate set by banks
ExplanationBase rate used for loans and credit cards.
#6
Which of the following factors does NOT typically impact your credit score?
Income level
ExplanationIncome level does not directly affect your credit score.
#7
What is the significance of a 'credit limit' on a credit card?
The maximum amount you can charge on the card
ExplanationIt sets the maximum amount you can borrow.
#8
Which credit bureau is not one of the three major credit reporting agencies in the United States?
FICO
ExplanationFICO is a scoring model, not a bureau.
#9
What is the 'debt-to-income ratio' used to assess in the context of credit?
Creditworthiness
ExplanationDetermines if a borrower can manage additional debt.
#10
What is the primary factor that determines your credit score?
Payment history
ExplanationRecord of paying bills on time.
#11
What is the purpose of a 'secured credit card'?
To build or rebuild credit
ExplanationRequires a deposit and helps establish credit.
#12
How long does a late payment typically stay on your credit report?
7 years
ExplanationNegative mark on credit report for 7 years.
#13
What is a 'charge-off' in the context of credit reports?
A debt that the creditor considers unlikely to be collected
ExplanationA debt written off as uncollectible.
#14
Which federal law grants consumers the right to obtain a free credit report annually?
Fair Credit Reporting Act (FCRA)
ExplanationAllows consumers to access their credit reports for free once a year.
#15
In the context of credit, what is a 'soft inquiry'?
An inquiry that does not affect your credit score
ExplanationChecking your own credit or pre-approved offers.
#16
What does 'debt consolidation' involve?
Combining multiple debts into a single loan
ExplanationMerging debts to simplify payments or lower interest.
#17
What does 'credit utilization ratio' represent in the context of credit scores?
The ratio of credit used to credit available
ExplanationPercentage of available credit being used.
#18
What is a 'judgment' on a credit report?
A formal court decision related to a debt
ExplanationCourt ruling against a debtor.
#19
In the context of credit, what is 'loan amortization'?
The process of paying off a loan with regular payments
ExplanationGradual reduction of debt through scheduled payments.