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Exam 6: Introduction to Consumer Credit

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Question 71

Multiple Choice

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Which FICO credit score would represent the least risky borrower?

A) 415
B) 562
C) 685
D) 702
E) 825

F) A) and E)
G) A) and B)

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Question 72

Multiple Choice

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Jim Roy visits the doctor for his annual check-up which costs $85.He is billed for this at the end of the month.What type of credit did Jim use?

A) Installment sales credit
B) Installment cash credit
C) Single lump-sum credit
D) Closed-end credit
E) Incidental credit

F) A) and D)
G) A) and C)

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Question 73

Essay

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What are the two basic types of credit? Give examples of both.

Brian Porter's net worth is $110,000,excluding his home.His liabilities of $50,000 include all of his credit card balances and the balance due on his auto loan and home improvement loan.His townhouse has a market value of $220,000 and he owes $190,000 to his mortgage company.What is Brian's debt-to-equity ratio?

To protect yourself against credit card fraud,you should sign your new credit cards as soon as they arrive.

What are a few things to consider before you cosign a loan?

If you cosign a loan and the debt is not paid off,then this fact does not become a part of your credit record.

What should you do if your identity is stolen?

In evaluating your credit application,a lender may:

Karen Price has determined that her net worth is $30,000,excluding her home.She owes $80,000 on her mortgage and $15,000 on a car loan.What is Karen's debt-to-equity ratio?

It is safer to use credit,since charge accounts and credit cards let you shop and travel without carrying a large amount of cash.

Consumer credit is based on trust in people's ability and willingness to pay bills when due.

Single lump-sum credit is a loan that must be repaid in total on a specified day,usually within 30 to 90 days.

Robert Smith has monthly net income of $1,050.He has a house payment of $450 per month,a car loan with payments of $250 per month,a Visa card with payments of $50 per month,and a credit card with a local department store with payments of $100 per month.What is Robert's debt payments-to-income ratio?

Consumer credit dates back to colonial times.

If you think you have been discriminated against by consumer reporting agencies or creditors,you should file a complaint with which government agency?

Describe the federal law that protects you from billing mistakes.

Jane Calvert is applying for a loan from a bank.The bank knows she owns a house worth $150,000 and a car with a trade-in value of $15,000 as well as other personal assets worth approximately $50,000.Which one of the 5 Cs of credit is the bank looking at?

A home equity loan is based on the difference between the current market value of your home and the amount you still owe on your mortgage.

The Consumer Financial Protection Bureau receives more consumer complaints about credit bureaus than about any other industry.