Cwmc Module 7: Credit Competency Test

The correct answers for this question are "Open a checking and savings account" and "Apply for loan or credit card through your bank." These suggestions are appropriate for someone just beginning to establish a credit history because opening a checking and savings account can demonstrate responsible financial management and provide a foundation for future credit opportunities. Applying for a loan or credit card through a bank can help establish a credit history with a reputable institution.

Reviewing your credit report and correcting any inaccuracies is the correct answer because it allows you to identify and correct any errors or discrepancies that may be negatively impacting your credit score. By doing so, you can ensure that your credit report accurately reflects your financial history and improve your creditworthiness. Closing all accounts not in use, applying for new accounts, and only charging 80% of your available balance may have some impact on your credit score, but they are not as effective as reviewing and correcting inaccuracies in your credit report.

The statement "The credit card companies wouldn't send me applications in the mail if I couldn't afford it" is a credit myth because credit card companies often send applications to individuals without considering their financial situation. The statement "If I don't use credit, I'll never be able to buy anything" is also a credit myth because it is possible to make purchases without relying on credit. The statement "Credit card interest is deductible" is a credit myth because credit card interest is generally not tax-deductible. Finally, the statement "I'll hurt my credit score if I check it all the time" is a credit myth because checking one's own credit score does not negatively impact it.

Payment history accounts for 35% of your credit score. This means that whether or not you have made your payments on time in the past plays a significant role in determining your credit rating.

Lenders primarily use Experian, TransUnion, and Equifax credit reporting agencies to determine whether to extend credit to a borrower. These agencies provide credit reports and scores that help lenders assess the creditworthiness of borrowers. By analyzing the borrower's credit history, payment behavior, and overall financial health, lenders can make informed decisions about granting credit. CIC Credit and FDIC are not credit reporting agencies, so they are not used by lenders for this purpose.

Paying your credit cards in full and on time is considered a wise financial choice because it helps you avoid accumulating debt and paying high interest rates. By doing so, you are demonstrating responsible financial behavior and maintaining a good credit score, which can have positive impacts on your financial future. This choice also allows you to have better control over your finances and avoid unnecessary fees or penalties.

Consumers cannot obtain free credit reports twice a year from any of the given sources. The website FreeCreditReport.com may offer credit reports but it is not free. Credit counseling agencies and collection agencies do not provide free credit reports. Local banks may offer credit reports but not necessarily for free. Therefore, none of the options mentioned in the question provide free credit reports twice a year.

In every response, a minimum of two website resources are required. This means that for each response, there should be at least two sources or references from websites to support the information provided.

The given answer options provide various indications that suggest a person may have been the victim of a scam. Unknown charges appearing on billing statements could indicate unauthorized transactions. Bills arriving from unknown or unfamiliar sources could suggest fraudulent activity. Inquiries about accounts that were not opened on a credit report could indicate identity theft. Lastly, if a collection agency cannot provide specific details about charges they claim are owed, it may be a sign of a scam.

Working with a credit counseling agency can have major drawbacks. One drawback is that it can negatively affect your credit score. This is because the agency may negotiate with creditors to lower interest rates or create a repayment plan, which can be seen as a negative factor by credit bureaus. Another drawback is that credit counseling agencies may lock you into a contract, limiting your flexibility and options.

Credit Counseling Agencies are facing the possibility of losing their non-profit status, as the government is considering taking it away. Additionally, most of these agencies receive "kickbacks" from credit card companies, which can influence the advice they provide. They also tend to avoid working with consumers who have lost their jobs or have mortgage problems but no credit card debt.

To pay old credit card balances with a new lower interest credit card, there are three options available: convenience check from the credit card company, cash advance from the new low-interest card, and balance transfer form. These options allow the individual to transfer the outstanding balance from the old credit card to the new one, taking advantage of the lower interest rate offered by the new card.

Credit score is a numerical representation of an individual's creditworthiness, which is used by lenders to assess the risk of lending money to that person. Credit rating, credit ranking, and FICO are all terms that are commonly used interchangeably with credit score. Borrowing power refers to the amount of money that an individual is able to borrow based on their creditworthiness, so it is also associated with credit score.

Under the CARD Act, credit card companies are prohibited from raising the interest rate for a period of six months if the cardholder is late in making payments. This provision aims to protect consumers from sudden and drastic increases in interest rates, giving them a grace period to catch up on their payments without being penalized with higher rates. The other options, having a cap on interest rates and not marketing to students under 21 years of age, are not mentioned in the given information and therefore cannot be considered correct.