Test Your KnowledgeLesson 3: A Fresh Start

Click on the letter of your choice to test your

understanding.

A B C

Question 1

Credit is an arrangement whereby

• You owe something, typically money, or something is due.A

• You receive goods, services, or money in exchange for a promise to repay at a later date.

B• You set money aside

that you can access quickly for unexpected expenses.

C

Question 2The opportunity cost of using credit is the

• Purchasing power of future money for past purchases.A

• The previous earning power of money spent on interest and fees.B

• Current purchases, interest, and fees. C

Question 3The type of credit that you get when a lender allows you to borrow an amount for a specific purpose for a specific amount of time at a given interest rate is called

• Installment/term credit.A• Noninstallment/service

credit.B• Revolving credit.C

Question 4The price that you pay for the use of money you borrow from a lender is called

• Principal.A• Interest.B• Loan term.C

Question 5The annual percentage rate (APR) is

• The total cost of credit to the lender.A

• Finance charge expressed as an monthly rate.B

• The interest rate for the whole year. C

Question 6A credit card is

• A type of credit that requires full payment by a specified date.A

• A credit tool with a limited number of monthly transactions.B

• A high-interest, revolving, unsecured loan.C

Question 7A credit report is

• A summary of loan and bill payments kept by a credit bureau.A

• A profile of your nationality, educational attainment, and credit obligations.

B• An active data file kept by

the credit bureau for 10 years.C

Question 8Also known as your “financial GPA,” a credit score is

• An annualized number that measures how you handle your financial obligations.

A• A snapshot of your level

of risk to a lender at a specific point in time.

B• A single factor used to

make lending decisions.C

Question 9The two components that make up the greatest percentage of the total credit score are

• Length of credit history and overall credit. A

• New credit and types of credit used.B• Payment history and amounts owed.C

Question 10Having an accurate credit report is important because

• Positive information increases credit opportunities and decreases the cost of borrowing.A

• Negative information reduces credit opportunities, increases the cost of borrowing, can impact service credit, and can eliminate some job offers.B

• All of the above.C

Thank you for participating in “Test Your

Knowledge”