UGBA 135 Midterm Exam 2023

FICO Score - Answer- measure of consumer credit risk Highest FICO Score - Answer- 850 Factors determining FICO Score - Answer- Credit report is based on: -35% paying your bills on time over time -30% your debt-to-credit ratio ( borrowing money/ credit limit) -15% length of credit history -10% mix of credit cards and loans (like to see things other than credit card; Rent, any loan (e.g. leasing car)) -10% new accounts and recent applications for credit How many FICO scores does a person have? - Answer- 3 How do you establish good credit? - Answer- borrow $ and pay it back on time according to its terms How much is taken out of your paycheck for SS and Medicare? - Answer- -12.4% of earned income to SS -2.9% of earned income to Medicare Debt-to-credit ratio - Answer- how to calculate: -$3000 debt, $6000 in credit :: 3000/6000 = 50% D/C ratio -try to be below 50% || 30% is the best Identity Theft: if you're a victim - Answer- -close and replace all accounts that have been tampered with or didn't open -file a police report If you are carrying a balance and you pay more than the minimum payment, where does the excess go? - Answer- the excess is used to pay off debt of highest interest rate, not the card with the smallest balance credit hold on account - Answer- -when a customer is consistently late in making payments, has exceeded their credit limit, or is identified as a bad risk, you can prevent additional credit purchases by placing their account on credit hold -if hold is executed, it will count against credit Maximum interest on credit card account - Answer- no legal maximum Who can see your credit scores? - Answer- Website for free credit report (federally mandated for credit reports) - Answer- Three credit scoring agencies - Answer- Transunion () -- Empirica score Equifax () -- Beacan score Experian () -- Experian model Best time to establish credit - Answer- when you don't need it aka younger i thinks When are your credit payments due? - Answer- generally about 21-25 days after your billing cycle ends Secure vs unsecure line of credit - Answer- Debit is secure Credit is unsecure (nothing to back it up other than credit history) How does cancelling inactive credit cards affect your credit score? - Answer- -can lower because it will increase your d/c ratio -if you cancel, cancel newest card first Prepaid cards - Answer- -offered by banks and nonbanks -not linked to bank accounts -fees: activation, inactivity, to load money onto cards, if you don't load money each month, check balance info, to use an ATM for cash, for using a check to close an account Cash advance - Answer- -using your credit card to withdraw cash -higher interest rates, no grace period (incur interest rates right off the bat) grace period - Answer- set length of time after the due date during which payment may be made without penalty What is a retail charge card? - Answer- -a credit card issued by a retailer allowing you to charge purchases made only with their store -higher interest rate 20-30% on unpaid balances -no grace period and interest begins on date of purchase -credit score can be lowered if you cancel card Can you increase credit score by i