Credit Management Quiz
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Questions and Answers

What is a credit score?

  • The maximum amount of credit you can use
  • A numerical rating of credit-worthiness (correct)
  • A report on past borrowing
  • A measure of how much money you have
  • What is the credit limit?

    The amount of money you can charge to a credit card.

    What does a credit report include?

    A record of a person's credit history and identifying information.

    The Fair Credit Reporting Act allows consumers to view their credit report.

    <p>True</p> Signup and view all the answers

    What is the Federal Fund Interest Rate?

    <p>An interest rate set by the Federal Reserve Bank regulating government loan interest rates.</p> Signup and view all the answers

    A hard credit inquiry has no effect on your credit score.

    <p>False</p> Signup and view all the answers

    A soft credit inquiry affects your credit score.

    <p>False</p> Signup and view all the answers

    What is the role of credit bureaus?

    <p>To collect credit information and calculate credit scores.</p> Signup and view all the answers

    What does a credit history record?

    <p>A person's borrowing and repayment activity.</p> Signup and view all the answers

    What is a default in credit terms?

    <p>When a borrower cannot or refuses to repay a debt.</p> Signup and view all the answers

    What is an Initial Fraud Alert?

    <p>An alert on your credit file to prevent identity theft.</p> Signup and view all the answers

    Study Notes

    Credit Score

    • A numerical rating reflecting an individual's credit-worthiness, indicating the likelihood of repaying debts.
    • The FICO score is the most widely used credit score in the United States.
    • Based on information from credit reports generated by three main credit bureaus.

    Credit Limit

    • The maximum amount of money that can be charged to a credit card.
    • Exceeding this limit may result in declined transactions and potential penalties.

    Credit Report

    • A detailed record of an individual's credit history, including loans and repayment activity.
    • Contains identifying information (names, addresses) to match individuals with their credit histories.

    Fair Credit Reporting Act

    • A federal law ensuring accuracy, completeness, and privacy of information in credit reports.
    • Consumers have the right to access their credit reports and dispute inaccuracies.

    Federal Fund Interest Rate

    • An interest rate established by the Federal Reserve Bank that influences government loan interest rates.

    Hard Credit Inquiry

    • Occurs when a creditor checks your credit history to make lending decisions.
    • Affects your credit score and remains on credit reports for up to two years.

    Soft Credit Inquiry

    • A background check on credit that does not impact your credit score, often conducted for employment purposes.

    Credit Bureaus

    • Companies, also known as credit agencies, collect and analyze individual credit information.
    • Major credit bureaus in the U.S. include Equifax, Experian, and TransUnion; they are private, for-profit entities regulated by the government.

    Credit History

    • A comprehensive record of all borrowing and repayment activities, including loans, credit lines, and payment records.
    • Differentiates between the actions taken (credit history) and the documented proof (credit report).

    Default

    • Occurs when a borrower fails or refuses to repay a debt or required payment.

    Initial Fraud Alert

    • A temporary alert placed on a credit file to help prevent identity theft.
    • Lasts for 90 days and can be renewed if necessary.

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    Description

    Test your knowledge on credit scores, reports, and limits. This quiz covers essential topics like the Fair Credit Reporting Act and federal interest rates, providing a comprehensive look at personal finance. Assess your understanding of the factors that impact creditworthiness.

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