Economic Education for Consumers Chapter 10 Study Guide Credit: You re In Charge

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1 Economic Education for Consumers Chapter 10 Study Guide Credit: You re In Charge Section 10.1 What is Credit? The ability to borrow money in return for a promise of future payment is When you are using credit, you are giving up in order to. List and Describe four reasons you might want to use credit The difference between the amount owed on a home and the home s value is called 5. Name two good reasons for owning your home. Economic Education for Consumers, Ch. 10 Study Guide Credit: You re In Charge. P. Developed by

2 6. T or F Statistic show that people with more education or training have higher incomes. 7. What four questions should you ask yourself before you borrow money? A basic rule of thumb is that your debt payments should be no more than what percentage of your take-home pay? Economic Education for Consumers, Ch. 10 Study Guide Credit: You re In Charge. P. Developed by

3 Economic Education for Consumers Chapter 10 Study Guide Credit: You re In Charge Section 10.2 How to Qualify for Credit. What must you have to be credit worthy? List and Describe the three C s of Credit. List two places where lenders get information about you. 4. List the five factors that contribute to your credit score Economic Education for Consumers, Ch. 10 Study Guide Credit: You re In Charge. P. Developed by

4 Economic Education for Consumers Chapter 10 Study Guide Credit: You re In Charge Section 10.3 Sources of Consumer Credit What are the two basic forms of consumer borrowing? A loan that is backed by something of value pledged to insure payment is called a Property pledged to back a loan is called 4. A loan that is not backed by any collateral is called an 5. T or F Most credit cards are considered unsecured loans. 6. T or F It is not necessary to shop around for a loan as all financial institution generally charge the same interest rate. 7. List five alternate sources of Consumer Loans Economic Education for Consumers, Ch. 10 Study Guide Credit: You re In Charge. P. 4. Developed by

5 8. T or F A pawnbroker is a low cost way to borrow money. 9. T or F Borrowing against your life insurance is usually a low interest way to get a loan. 10. T or F Finance Companies only loan money to people with very high credit ratings. 1 T or F Credit Card cash advances are a very expensive way to borrow money. 1 T or F Buying consumer goods through a rent to own company can save you money. 1 T or F When you use a credit card, you are borrowing money. 14. What type of charge account requires you to pay your balance off each month? 15. What type of charge account allows you to carry a balance from one month to the next? 16. Identify three sources of credit cards. 17. Why do credit card companies offer incentives? 18. How can you avoid paying high interest rates on a credit card? Economic Education for Consumers, Ch. 10 Study Guide Credit: You re In Charge. P. 5. Developed by

6 19. T or F Interest Rates for credit cards is generally higher that almost any other kind of consumer credit. 20. Identify and describe three ways to control Credit Card Costs. Economic Education for Consumers, Ch. 10 Study Guide Credit: You re In Charge. P. 6. Developed by

7 Economic Education for Consumers Chapter 10 Study Guide Credit: You re In Charge Section 10.4 Credit Rights and Responsibilities List and Describe the five Consumer Credit Rights? 4 5. What should you do if you think you were refused credit unfairly? Economic Education for Consumers, Ch. 10 Study Guide Credit: You re In Charge. P. 7. Developed by

8 What are the three Consumer Credit Responsibilities? 3 4. What are four ways to exercise self-control with credit? 4 Economic Education for Consumers, Ch. 10 Study Guide Credit: You re In Charge. P. 8. Developed by

9 Economic Education for Consumers Chapter 10 Study Guide Credit: You re In Charge Section 10.5 Maintain a Good Credit Rating T or F A good way to establish a credit history is to start small by applying for a store credit card. T or F Missing only one payment will not affect your credit history. T or F Making regular deposits to a savings account will help you establish a credit history. 4. T or F If you are married, you do not need to establish a credit history in your own name. 5. T or F If you are married, loans & credit cards in both spouses names will only affect the credit rating of the husband. 6. T or F It is easier to destroy a credit history than to build a good one. 7. T or F Lenders will usually be flexible with payments if you contact them as soon as there is a problem. 8. T or F It is important to read every contract you sign and make sure you understand it. 9. T or F An acceleration clause will protect you if you miss a payment. 10. T or F A final payment that is much larger than the regular payment is called a balloon payment. 1 T or F Balloon payments are always bad. 1 T or F Bankruptcy is a legal process in which people who cannot pay their debts must surrender most of their assets. 1 T or F Bankruptcy will not affect your credit rating. 14. T or F A thief can use your identity to ruin your credit. 15. T or F A thief cannot steal your identity with just your social security number. Economic Education for Consumers, Ch. 10 Study Guide Credit: You re In Charge. P. 9. Developed by

10 16. T or F A debt consolidation loan is designed to pay off all your smaller loans and give you one monthly payment. 17. T or F A debt consolidation loan always results in you paying less over the term of the loan. Economic Education for Consumers, Ch. 10 Study Guide Credit: You re In Charge. P. 10. Developed by