Fixing Your Credit Math With A Quiz
Welcome to the "Fixing Your Credit Math With A Quiz" challenge! Whether you're a financial whiz or just starting your credit journey, this quiz is designed to enhance your understanding of the crucial math behind fixing your credit. Embark on a journey through questions that delve into the intricacies of credit utilization, APR calculations, and the factors influencing your credit score. Each question is a step toward mastering the mathematical aspects of credit management.
So, are you ready to test your knowledge and boost your financial literacy? Let the "Fixing Your Credit Math With A Quiz" be your guide to unraveling Read morethe numbers behind a sound credit strategy. Sharpen your math skills, broaden your financial awareness, and take a step closer to mastering the art of credit management.
Fixing Your Credit Math Questions and Answers
- 1.
What formula is commonly used to calculate your credit utilization ratio?
- A.
(Total Debt / Total Credit Limit) * 100
- B.
Total Debt / Total Credit Limit
- C.
Total Credit Limit * Total Debt
- D.
Total Debt * Total Debt
Correct Answer
A. (Total Debt / Total Credit Limit) * 100Explanation
The credit utilization ratio is a measure of how much of your available credit you're using. It's calculated by dividing your total debt by your total credit limit and then multiplying by 100 to express it as a percentage. Lower ratios are generally considered better for your credit score.Rate this question:
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- 2.
If you have a credit card with a $2,000 limit and a balance of $500, what is your credit utilization ratio?
- A.
25%
- B.
50%
- C.
75%
- D.
100%
Correct Answer
A. 25%Explanation
Calculate the ratio by dividing the credit card balance ($500) by the credit limit ($2,000) and multiplying by 100: ($500 / $2,000) * 100 = 25%.Rate this question:
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- 3.
If you have three credit cards with limits of $1,000, $2,000, and $3,000, and balances of $500, $1,000, and $1,500, what is your total credit utilization ratio?
- A.
33.33%
- B.
50%
- C.
75%
- D.
100%
Correct Answer
B. 50%Explanation
Calculate the ratio for each card: ($500 / $1,000) * 100 = 50%, ($1,000 / $2,000) * 100 = 50%, ($1,500 / $3,000) * 100 = 50%. Average ratio: (50% + 50% + 50%) / 3 = 150% / 3 = 50%.Rate this question:
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- 4.
If you have a credit card with an APR of 18% and a balance of $1,000, what is the interest charged for one month?
- A.
$18
- B.
$15
- C.
$180
- D.
$150
Correct Answer
B. $15Explanation
To calculate the interest for one month, you multiply the APR (18%) by the balance ($1,000) and then divide by 12 (months). The result is ($1,000 * 18%) / 12 = $15. This means that for the given scenario, the interest charged for one month would be $15.Rate this question:
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- 5.
What is the purpose of a grace period on a credit card?
- A.
Delaying Payment
- B.
Interest-Free Period
- C.
Increasing Credit Limit
- D.
Lowering Credit Score
Correct Answer
B. Interest-Free PeriodExplanation
Interest-Free Period is the purpose of the grace period, providing an interest-free period on credit card purchases if the balance is paid in full by the due date. This allows cardholders to avoid paying interest on their purchases during this specified period.Rate this question:
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- 6.
If you have a late payment fee of $25 and an interest charge of $30 on your credit card, what is the total additional cost to your balance?
- A.
$5
- B.
$25
- C.
$30
- D.
$55
Correct Answer
D. $55Explanation
Simply add the late payment fee and interest charge: $25 (late payment fee) + $30 (interest charge) = $55.Rate this question:
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- 7.
What factor has the least impact on your credit score?
- A.
Payment History
- B.
Credit Utilization Ratio
- C.
Types of Credit in Use
- D.
Length of Credit History
Correct Answer
C. Types of Credit in UseExplanation
Types of Credit in Use have the least impact on your credit score, although all factors are important. While factors like payment history and credit utilization have more influence, the types of credit you use play a smaller role in the overall calculation.Rate this question:
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- 8.
How does closing a credit card account affect your credit score?
- A.
Increases Credit Score
- B.
Decreases Credit Score
- C.
Has No Effect
- D.
Boosts Credit Utilization Ratio
Correct Answer
B. Decreases Credit ScoreExplanation
Decreases Credit Score is the correct option. Closing a credit card account can negatively impact your credit score by reducing the total available credit, potentially increasing your credit utilization ratio. A lower credit score may result from the decrease in available credit and the impact on credit utilization.Rate this question:
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- 9.
If your credit score increases by 50 points after paying off a loan, and your original score was 650, what is your new credit score?
- A.
700
- B.
750
- C.
650
- D.
600
Correct Answer
A. 700Explanation
Add the increase (50 points) to the original score (650): 650 + 50 = 700.Rate this question:
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- 10.
What does "APR" stand for in the context of credit cards?
- A.
Annual Percentage Rate
- B.
Average Payment Requirement
- C.
Available Credit Period
- D.
Account Performance Rating
Correct Answer
A. Annual Percentage RateExplanation
Annual Percentage Rate (APR) is the annualized interest rate charged for borrowing on a credit card. It represents the cost of borrowing, including interest and fees, expressed as a percentage. Understanding APR is crucial for evaluating the overall cost of credit and making informed financial decisions.Rate this question:
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Quiz Review Timeline +
Our quizzes are rigorously reviewed, monitored and continuously updated by our expert board to maintain accuracy, relevance, and timeliness.
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Current Version
-
Mar 08, 2024Quiz Edited by
ProProfs Editorial Team -
Dec 28, 2023Quiz Created by
Kriti Bisht
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