PF Ch. 5 T/F ?’s

False Consumer credit refers to the use of debit cards for personal needs
True Consumer credit dates back to colonial times when it was extensively used by farmers
False Consumer credit allows businesses to be more efficient or more productive
True Economists recognize consumer credit as a major force in the American economy
True When used effectively, credit can help a consumer have more and enjoy more
False A trade off of a credit is that it increases the amount of money that will be available to spend in the future
False A disadvantage of using credit is its use when making a hotel reservation
False During the grace period, finance charges are assessed at only have the normal rate
True Credit can indicate stability since lenders consider you a good risk
False Although credit allows immediate satisfaction of needs and desires, a greater advantage is that it increases total purchasing power
False Closed-end credit consists of loans made on a continuous basis with periodic bills for a least partial payment
True Open-end credit consists of loans made a continuous basis with periodic bills for at least partial payment
True Closed-end credit is used for a specific purpose and involves a specific amount
True Installment sales credit is a loan that allows a consumer to purchase high-priced items
False A consumer applies for open-end credit to make a single purchase, such a large appliance
True The least expensive loans are often provided by parents or other family members
False The most expensive loans are often provided by parents or other family members
False The easiest loans to obtain are also the least expensive
False Interest paid on a credit card is tax-deductible
True A credit card holder who pays the full balance during the grace period each month is actually getting a free loan from the credit card company
False A secured credit card is most appropriate for someone with a strong credit background
False Experts suggest that you spend more than 20 percent of your after-tax income on consumer credit payments
False The debt-to-equity ratio is calculated by dividing your total liabilities, including mortgage, by net worth
True In the five C’s of credit, character refers to the borrower’s trustworthiness and stability
False In the five C’s of credit, capacity refers to the borrower’s trustworthiness and stability
False In the five C’s of credit, capital refers to the borrower’s ability to pay additional debts
False In the five C’s of credit, conditions refer to what will happen if the borrower does not repay the loan
False The Equal Credit Opportunity Act requires that a lender not turn you down for credit based on your age as long as you are old enough to sign a legal contract, which is usually allowed at age 16
True FICO and VantageScore are two methods used to judge creditworthiness
False The higher your FICO score, the more risk you pose to creditors
False FICO is a better score to use than VantageScore for consumers with limited credit histories
True A credit file can include your spouse’s name and Social Security number
True The Fair Credit Reporting Act, enacted in 1971, places limits on who can obtain your credit report
False A bankruptcy remains on a credit file for no more than 5 years
True Most information in your credit file may be reported for only 7 years
False You have a legal right to sue a credit bureau if you observe an error in your file
False The Annual Percentage Rate is lower than the stated rate for loans that are repaid in monthly payments
True The longer the term for a loan is given interest rate, the higher the overall interest charges
False The add-on interest calculation uses the formula: Interest = Principal x Rate of interest x Time
False The amount of interest paid is independent of the length of the loan
True The Truth in Lending Act requires that creditors explain how they calculate the finance charge
False The expected rate of inflation should not be considered when determining the amount of interest a creditor should charge
False The longer it takes for you to pay off a bill, the less interest you pay
True If you purchase something with a credit card, the finance charges you pay on an item could end up being more than the item is worth
False According to law, a creditor may threaten your credit rating while you are negotiating a billing dispute
False According to the Fair Credit Billing Act from 1975, a creditor must adjust the disputed amount in your account or tell you why the bill is correct within 30 days
True According to the Fair Credit Billing Act from 1975, a consumer may tell his credit card company to stop payment for a defective good if he made a sincere attempt to resolve the problem with the store
True The first sign of stolen identity might be that you get bills for a credit card account that you never opened
True If you are a cosigner for a loan and the debt is not repaid, then that fact will appear on your credit report
True You should keep a record of your credit card number separate from your card
False The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 made it easier for consumers to file Chapter 7 bankruptcy

Leave a Reply

Your email address will not be published. Required fields are marked *