Ramsey Classroom Chapter 4: Debt

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35 Terms

1

The Federal Trade Commission (FTC) is one of many U.S. federal agencies that regulate the consumer credit system and enforce the laws related to it.

True

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2

A yearly fee that's charged by the credit card company for the convenience of the credit card.

Annual fee

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3

Preferred method of debt repayment; includes a list of all debts organized from smallest to largest balance; minimum payments are made to all debts except for the smallest, which is attacked with the largest possible payments.

Debt snowball

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4

Which of the following is the most cost-effective option for purchasing a home?

The most ideal way to buy a house is with 100% down; if that is not an option, you should get no more than a 15-year, fixed rate mortgage with a down payment of at least 10%.

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5

It is okay to use a credit card if you pay it off every month.

False

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6

What is paycheck garnishment?

A court-ordered attachment that allows a lender to take monies owed directly from a borrower's paycheck

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7

A long-term rental agreement on a car; a form of secured long-term debt.

Lease

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8

Which of the following is not a factor in determining a FICO score?

Paying cash for all purchases

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9

What factors affect a credit score?

all of the above

(type of debt, new debt, duration of debt)

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10

You must establish credit in order to buy a house.

False

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11

Which of the following is not a good idea for getting out of debt?

Borrow money from your parents to pay for the debt

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12

Co-signing a loan is a good way to help a friend or relative.

False

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13

An interest rate charged to a customer during the early stages of a loan; the rate often goes up after a specified period of time.

Introductory rate

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14

When a person owes more on an item (like a car or house) than it is worth, the person is said to be _________ on the loan.

Upside down

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15

Which of the following is not a recommended step in the Drive Free method of purchasing a car?

Explore new car dealerships for the best interest

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16

A detailed report of an individual's credit history.

Credit report

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17

Individual account information is removed from your credit report seven years after the last activity on the account, except for Chapter 7 bankruptcy, which stays on your credit report for:

10 years

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18

Teens are a huge target of credit card companies today.

True

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19

Which of the following is a sign that your identity may have been stolen?

all of the above

(a call from a collection agency about a debt you didn't incur, bank and billing statements don't arrive on time, your credit report shows accounts you didn't open)

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20

Which of the following things cannot be done with a debit card but can be done with a credit card?

Go into debt

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21

You can and should obtain a free copy of your credit report annually in order to check for any suspicious activity.

True

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22

Time frame that a loan agreement is in force, and before or at the end of which the loan should either be repaid or renegotiated.

Loan term

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23

Which of the following is not a credit myth?

Borrowing money can have serious consequences and prevent you from building wealth.

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24

If you do not have a FICO score, what factors will determine whether or not you qualify for a mortgage?

History of rental and utility payments

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25

You need to have a credit card to rent a car or check in to a hotel.

False

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26

Which of the following best summarizes how the use of a credit card for purchases instead of cash can change one's spending behavior?

Studies show that consumers typically spend more when using credit as opposed to cash purchases.

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27

A credit score is intended to measure:

The risk of your not repaying debt

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28

Cost of borrowing money on an annual basis; takes into account the interest rate and other related fees on a loan.

Annual percentage rate (APR)

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29

Under the Fair Credit Reporting Act (FCRA), any person or organization may check a person's credit information without having a legitimate need.

False

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30

If you are a victim of identity theft, you are only responsible for paying back half of the debt.

False

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31

Which of the following is not recommended in the debt snowball method of getting out of debt?

Every extra dollar you get should be thrown at the largest debt first.

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32

A card issued by a bank that allows users to finance a purchase.

Credit card

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33

There are three credit bureaus: Experian, TransUnion and Equifax.

True

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34

A decrease or loss in value.

Depreciation

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35

Which of the following statements is false?

Under FCRA, consumers are allowed to receive one free credit report every five years.

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