| The U.S. Congress enacted the Fair Credit Reporting Act to address concerns over consumer credit report accuracy, privacy, and fairness. | |
| Prior to the FCRA, consumers were unable to challenge errors in their credit reports. | |
| Under FCRA, consumers are allowed to receive one free credit report every five years. | |
| Under FCRA, creditors must notify consumers if they deny credit based on a credit report file, and they must also tell the consumer which of the three credit bureaus provided the report. |
2.
Which of the following is not a recommended step in the Drive Free method of purchasing a car? (5 points)
| Plan your purchase in advance using the sinking fund method of saving. | |
| Explore new car dealerships for the best interest rate. | |
| Start with an inexpensive car and gradually move up in car value as your savings increases. | |
| Place your savings in a mutual fund so that your money can make more money. |
3.
Which of the following is not recommended in the debt snowball method of getting out of debt? (5 points)
| List your debts in order from smallest to largest balance and focus on paying the smallest debt off first. | |
| Attack your debt with intensity. | |
| Every extra dollar you get should be thrown at the largest debt first. | |
| Every time you pay off a debt, you add its old minimum payment to your next debt payment. |
4.
Individual account information is removed from your credit report seven years after the last activity on the account, except for Chapter 7 bankruptcy, which stays on your credit report for: (5 points)
| 10 years | |
| 1 year | |
| 5 years | |
| 20 years |
5.
You can and should obtain a free copy of your credit report annually in order to check for any suspicious activity. (3 points)
| True | |
| False |
6.
It is okay to use a credit card if you pay it off every month. (3 points)
| True | |
| False |
7.
Co-signing a loan is a good way to help a friend or relative. (3 points)
| True | |
| False |
8.
Select the word that is described in the statement. (15 points)
| 1. | A detailed report of an individual’s credit history |
| 2. | Cost of borrowing money on an annual basis; takes into account the interest rate and other related fees on a loan |
| 3. | Preferred method of debt repayment; includes a list of all debts organized from smallest to largest balance; minimum payments are made to all debts except for the smallest, which is attacked with the largest possible payments |
| 4. | A decrease or loss in value |
| 5. | Time frame that a loan agreement is in force, and before or at the end of which the loan should either be repaid or renegotiated |
| a. | debt snowball |
| b. | credit report |
| c. | loan term |
| d. | annual percentage rate (APR) |
| e. | depreciation |
9.
Describe the difference between a secured and an unsecured loan. (13 points)
10.
Explain why financing a car is a bad idea. (13 points)
11.
Describe the negative consequences of taking on debt. What effect can debt have on your future? Be sure your answer is in paragraph form with a minimum of five sentences. (30 points)
