What’s Your Credit IQ?
1. When shopping for credit cards evaluate: 7. A grace period is: a. Fees and charges. b. The value to you of “perks” such as rebates. c. APR (interest rate) and the way finance charges are calculated. d. All of the above. 2. The most important factors that lenders use when deciding whether to approve a loan are: a. b. c. d. Marital status and number of children. Bill paying record and income. Age and gender. Education and occupation. a. The “free” period when you don’t have to pay interest on your credit card debt. b. The time between when you receive your bill and when you have to pay it. c. The amount of time, usually 20-25 days, during which you don’t have to pay interest on your credit card purchases, if you have no outstanding balance on your card. d. The option of skipping one monthly payment each year. 8. Credit legislation to protect consumers includes: a. Limits on credit cardholder’s liability for lost or stolen credit cards. b. The right to review your credit record and have erroneous information investigated and corrected. c. The opportunity to dispute errors in your credit card billings. d. Two of the above. e. Three of the above. 9. When considering your credit application most creditors prefer that your non-mortgage debt payments are no more than: a. b. c. d. e. 3-5% of your take home pay 8-10% of your take home pay 10-12% of your take home pay 12-15% of your take home pay 15-20% of your take home pay
3. The best indicator of the cost of a loan is the: a. b. c. d. Number of monthly payments. Monthly payment amount. APR. Loan amount.
4. How long will it take you to pay off a $2000 credit card balance at 18% APR if you make the minimum monthly payment of 3% or $60? a. Three years b. Six years c. Nine years d. Twelve years
5. To keep credit card interest payments as low as possible: a. Try to pay off your bills in full every month. b. Use some of your savings that earn a lower interest rate to pay off your high interest credit card bills. c. Switch to a different credit card that has a lower APR. d. All of the above. 6. The average credit card interest rate today is close to: a. 8% c. 16% b. 12% d. 19%
10. Which of the following warning signals indicate overextension with credit cards? a. Credit charges at or over card limits. b. Routinely paying only the minimum monthly payment. c. Unable to make minimum payments or routinely late on bill payments. d. All of the above.
Answers: 1 (d); 2 (b); 3 (c); 4 (d); 5 (d); 6 (c); 7 (c); 8 (e); 9 (e); 10 (d)
Scoring: 9-10 Correct: GREAT GOING! You are credit wise! MONEY2000/Bul4, Wksht1 Michigan State University Extension programs and materials are open to all without regard to race, color, national origin, sex, disability, age, or religion. MSU is an affirmative-action, equal-opportunity institution. 5-8 Correct: BE CAREFUL! You may be spending more money than is necessary on credit. 0-4 Correct: CAUTION NEEDED! We suggest you seek additional Information about the wise use of credit.