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Maryann Lawrence wants to get a loan in just her name. She knows the creditor cannot:


A) refuse her credit if she is creditworthy.
B) consider income from her part-time job.
C) consider the payment history of all her joint accounts.
D) consider alimony payments she receives from her ex-husband.
E) consider child support payments she receives from her ex-husband.

F) A) and D)
G) B) and D)

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In addition to department stores, where else is a good place to obtain your first credit card?


A) Banks
B) Credit unions
C) Savings and loans associations
D) Gasoline companies
E) Investment companies

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

Correct Answer

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A term that refers to the borrower's assets or net worth is called:


A) capacity.
B) character.
C) capital.
D) collateral.
E) conditions.

F) B) and E)
G) None of the above

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Installment sales credit is a:


A) direct loan of money for personal purposes.
B) direct loan of money for home improvement.
C) loan that allows you to receive merchandise such as a refrigerator or furniture.
D) direct loan for vacation purposes.
E) synonym for a single lump-sum credit.

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

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Dave's take-home-pay per month is $2,200. What is the maximum dollar amount of debt payments, excluding a home mortgage, he should have?


A) $880
B) $440
C) $330
D) $220
E) $0

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

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While you are resolving a billing dispute, a creditor may:


A) not threaten your credit rating.
B) send this information to a credit bureau.
C) require you to pay the bill in full and then credit your account if the error is found.
D) start the collection process.
E) demand that you surrender your credit card.

F) C) and E)
G) B) and C)

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A good example of open-end credit is:


A) the use of a bank credit card to make a purchase.
B) a mortgage loan from a savings and loan institution.
C) an automobile loan from a credit union.
D) an installment loan from a furniture store.
E) an installment loan for purchasing a major appliance.

F) A) and D)
G) All of the above

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Affan Chawdry 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 Affan's debt payments-to-income ratio?


A) 2.63
B) 1.24
C) 0.81
D) 0.38
E) 0.50

F) A) and D)
G) A) and E)

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In the 5 Cs of credit, collateral is an asset that you pledge to a financial institution to obtain a loan.

A) True
B) False

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In the 5 Cs of credit, capital refers to your financial ability to meet credit obligations.

A) True
B) False

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In the 5 Cs of credit, capital refers to your assets or net worth.

A) True
B) False

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There are very few valid reasons for using credit.

A) True
B) False

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Which of the following is most likely not a valid reason for using credit?


A) Borrowing for a stay in a hospital because of appendicitis
B) Borrowing to purchase a car so that you can go to work full-time
C) Borrowing to buy a printer for your home office now because you know it will be twice as expensive in two years
D) Borrowing to pay for your expensive dinner and movie every week
E) All of these are valid reasons for using credit.

F) A) and C)
G) All of the above

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Michael Flowers believes that his credit card company has made an error in its monthly statement to him. Which consumer protection law specifies procedures he can use to dispute this monthly statement?


A) Fair Credit Reporting Act
B) Fair Credit Billing Act
C) Equal Credit Opportunity Act
D) Fair Debt Collection Practices Act
E) Truth in Lending Act

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

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The maximum amount of credit you are allowed by a creditor is called:


A) revolving credit.
B) line of credit.
C) convenience credit.
D) installment cash credit.
E) single lump-sum credit.

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

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Credit bureaus obtain data from which of the following?


A) banks.
B) finance companies.
C) merchants.
D) credit card companies.
E) All of these

F) B) and D)
G) C) and E)

Correct Answer

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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.

A) True
B) False

Correct Answer

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The information in your credit report is primarily used by the credit bureau to compute your:


A) debt to equity ratio.
B) FICO credit score.
C) debt payment to income ratio.
D) liquidity ratio.
E) long term capitalization ratio.

F) All of the above
G) B) and D)

Correct Answer

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Installment sales credit is a loan that allows you to receive high-priced items, such as large appliances or furniture.

A) True
B) False

Correct Answer

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

A) True
B) False

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