Credit Quiz
Updated: January 25, 2007
Get smart about your credit about the importance of financial literacy and credit smarts.
To see how well you know the fundamentals of credit take the quiz below.
Q. The balance on your credit card $2,000, and the card company charges 18% interest.
The minimum payment is stated on your bill as $40.
Assuming you charge nothing else on that card but pay the minimum payment as required, how long will it take you to pay off the debt:
A) 12 months
B) 30 months
C) 30 years
The answer: C
It will take you 370 months to be rid of your debt, and the total amount that original $2,000 debt will grow to, factoring in interest payments and finance charges, is close to $7,000. In that time, you will play $4,931.15 in interest.
Q. You find yourself using your credit card to cover the cost of basic needs (like food or rent) because you`ve been regularly short of cash at the end of each month, what`s the best thing to do:
A) open another credit card account solely for household expenses
B) make a budget
C) shop around for a low interest loan to pay for the credit debt and use only cash for the month expenditures?
The answer: B
Make a budget. paying for basic needs because you don`t have enough money at the end of the month is a sign of credit stress.
Adding another credit card will only increase your debt and your stress level. add up all of your expenditures, and then list all forms of income. compare the two. If expenses are greater than income, you need to consider ways to reduce them and/or increase income.
Q: You`ve been denied credit based upon what you consider to be inaccurate information on your credit report. What should you do?
A) close the credit card account in question and apply for a new card
B) call the credit bureau whose report lists the error and explain why the information is wrong and ask them to fix it.
C) obtain a copy of your credit report from the bureau who provided the report to the credit issuer denying you the credit.
The answer: C
But you must take it a step further. It`s important to review your credit report and check all information listed. Once you identify information you think is inaccurate, you must contact the organization that posted that information, in writing, to redress your concerns. Sending a copy of your correspondence to the credit reporting agency shows that you are taking responsible steps to correct an error, and the agency may be able to help you with your claim. Errors occur, so check your report regularly.
