A B C

TEST YOUR KNOWLEDGELESSON 3: A FRESH START

Click on the letter of your choice to test your understanding.

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

Lesson 3: A Fresh Start

QUESTION 1

THE 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

Lesson 3: A Fresh Start

QUESTION 2

THE 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

Lesson 3: A Fresh Start

QUESTION 3

THE PRICE THAT YOU PAY FOR THE USE OF MONEY YOU BORROW FROM A LENDER IS CALLED:

• PrincipalA• InterestB• Loan termC

Lesson 3: A Fresh Start

QUESTION 4

THE 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

Lesson 3: A Fresh Start

QUESTION 5

A 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

Lesson 3: A Fresh Start

QUESTION 6

A 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

Lesson 3: A Fresh Start

QUESTION 7

ALSO 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

Lesson 3: A Fresh Start

QUESTION 8

THE 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

Lesson 3: A Fresh Start

QUESTION 9

HAVING 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

Lesson 3: A Fresh Start

QUESTION 10

Lesson 3: A Fresh Start

THANK YOU FOR PARTICIPATING IN “TEST

YOUR KNOWLEDGE”