Personal finance test 2

What credit score number helps to lower the interest rate and speed up your credit approval in purchasing a home?

750

Why is it important to establish a credit history?

To demonstrate responsibility with your credit

What is an advantage of having a good credit score?

It is easier to get credit in an emergency

Which of the following is not included in a credit report?

Salary information

What is contained in a credit report?

Bankruptcy records, Unpaid child support, and Addresses

Which indicator drives a FICO score the most?

History of payments

FICO scores range between

300—850

The percentage of accountability reflected in your FICO score for the ‘amount you owe’

30%

What does FICO stand for?

Fair Isaac Corporation (Bill Fair & Earl Isaac initiated the FICO credit score)

Mike and Bob want to improve their FICO credit score. Mike uses 10% of his credit limit and Bob uses 75% of his limit. Who is most likely to improve his score the most?

Mike

In reviewing your payment history on a credit report, a 30 in January means

Your payment was 30 to 59 days late in January

Which of the following can be found on your credit report?

Payment history, Recent balance and required payment, and The date an account was opened

Which of the following is something not typically found on a credit report?

Times you have viewed your own report

What is the recommended number of major credit cards you should have?

2(Visa/Mastercard and discover)

How many years does negative information stay on a credit report?

7

If you find an error on your credit report what should you do?

Write a letter to the credit bureau stating the errors

How can negative information on your credit report impact you?

It can prevent you from getting the apartment you wanted, It can keep you from getting loans, It can keep you from getting certain jobs

After reviewing your credit report, you may need to contact the credit bureaus to

Add another account, correct an error, and get rid of negative information

How is a FICO credit score calculated?

Payment history accounts for about 35% of the credit score, the amount owed accounts for 30%, length of credit history accounts for 15%, new credit accounts for about 10%, and types of credit in use accounts for about 10%

Which of the following does not have an adverse (negative) effect on your credit score?

Having a mix of both revolving and installment credit

Which of the following are ways to improve a FICO score?

Pay bills on time and pay as agreed

What government website will help you if your identity is stolen?

FTC (Federal Trade Commission)

The credit bureau has _____ days to investigate an error found in your credit report.

30

How many credit bureaus are there? What are their names?

Three: Equifax, TransUnion, and Experian

Stealing credit card information by swiping it through a processing machine that gathers information is called _________________.

Skimming

_____________ is when someone steals your personal information to commit theft or fraud.

Identity theft

What can you do to protect yourself from identity theft?

Check all of your financial statements for accuracy as soon as you receive them and Monitor your credit report

Which is not a way to protect your identity?

Carry your Social Security card with you at all times

Which of the following terms is used to describe bogus marketing schemes by phone, mail, or e-mail designed to gain personal information that is then used to steal your identity?

Phishing

What is the most common form of identity theft?

Unauthorized use of a credit card, debit card, or check

Debt is an important tool to tap at different points in your life.

true

All three credit reporting agencies have different formats for both their paper and online reports but provide similar information.

true

Late payments made two years ago will have less influence on your credit score than a late payment made two months ago.

true

The perfect FICO credit score is 1,000.

false

An inaccuracy in a credit report is a rarity.

false

The Fair Credit Reporting Act provides consumers the right to correct errors on their reports.

true

Correcting an error on a credit report involves a simple phone call.

false

Information regarding a criminal conviction can remain on a credit report indefinitely.

true

It is okay to discuss personal financial information over the phone.

false

Federal laws have been established to limit your liability if you should become a victim of identity theft.

true

The wealthy are the most frequent targets of identity theft.

false

Irresponsible use of debt can lead to a decreasing credit score and cause you to pay a higher interest rate when you apply for a home loan.

true

Without establishing good credit habits, it is very difficult to buy a house.

true

Explain the difference between a regressive tax and a progressive tax.

All the choices

All the following are examples of regressive taxes except

Federal income tax

A regressive tax would be imposed on which of the following?

all of the choices are correct

Which product has an excise tax on it?

Cigarettes

Which tax is applied uniformly, thus imposing a greater burden on the

poor than on the rich?

Regressive

Who pays 6.2% of an employee's salary toward Social Security tax and

1.45% toward Medicare?

Both the employee and the employer

If you made $25,000 last year in income and paid $100 in gasoline tax,

what percentage of income was your ‘gasoline' tax?

0.4%

What type of tax is an accounting of everything you own or have an

interest in on the day you die?

Estate

The military, fire & police depts., public schools, libraries, and FEMA are

examples of ___.

public goods and services

If you earn a salary of $30,000, what will your total FICA taxes be?

Assume the following: Social security = 6.2%, Medicare = 1.45%, State income tax = 3.07%

2,295 [$30,000 x (6.2% +1.45%)]

Which of the following principles accurately describes a regressive tax?

All of the choices are correct

What is a dollar amount allowed by law as a reduction from your

adjusted gross income (AGI) that would otherwise be taxed?

Deduction

By January 31st of each year, what form must employers file to report

your wages and tips to you and the government?

W-2 form

Which tax form is available for anyone to use?

1040

If your total tax deductions are greater than the standard deduction

allowed by the IRS, you can list them on Form 1040 Schedule A, and reduce your income tax due. This is known as:

Itemized deductions

What reduces your tax liability, dollar-for-dollar?

tax credits

What would your filing status be if you were single with no dependents?

single

Which of the following is an example of a refundable credit?

Earned income credit

A taxpayer who chooses not to take the standard deduction may

choose which of the following alternatives?

itemized deduction

What is gross income?

Wages, bonuses, tips, interest earnings, dividends, and gains from

selling investments

There are _________________ filing statuses.

5

Why is your filing status important?

A and B

What is the extra tax a person has to pay on top of his or her regular

income tax?

Alternative minimum tax

What is (are) considered adjustments to gross income?