FFM Exam Study Guide with Complete
Solutions 2025
Good uses of credit - ANSWER 1. Convenience
2. Meet financial emergencies
3. Make reservations
4. Purchase "big ticket" items
5. Taking advantage of free credit
6. Obtain an education
Installment credit (closed end credit) - ANSWER borrower must repay the amount owed
plus interest in a specific number of of equal payments, usually monthly.
Non installment credit - ANSWER single payment, open ended credit, and service credit
Open ended credit - ANSWER pre-approved loan between a financial institution and
borrower that may be used repeatedly up to a certain limit and can subsequently be
paid back prior to payments coming due
Continuous debt method - ANSWER unable to get out of debt every four years,
developing cycle
-approach for determining debt limit
- ANSWER
Downside of credit - ANSWER -Use of credit reduces financial flexibility and buying
power
-Make impulse purchases and could lead to overspending
,-Financially overstretched
-Interest can be costly
Interest on credit is usually expressed in terms of: - ANSWER APR (Annual Percentage
Rate)
Monthly payments are made up of a portion of the _________ and interest - ANSWER
original loan
One way to lower the total cost of borrowing is by: - ANSWER increasing the monthly
amount you pay
What is a credit report? - ANSWER Your credit report is a record of how you have
borrowed and repaid debts.
-An up-to-date, reasonably objective description of the status of many of your credit
accounts.
"Big 3" credit reporting agencies - ANSWER Equifax
Experian
TransUnion
A credit report includes: - ANSWER -Identifying Information
-Credit Accounts
-Inquiries
-Public Record and Collection Items
Effects of credit score - ANSWER Single most important factor determining approval
, -Bad score = high interest
Ignoring your credit score could - ANSWER cost you money
Your credit _____ is your credit _____ - ANSWER past; future
Who can see your credit report? - ANSWER Creditors
Employers
Government agencies
Insurance companies
Landlords
Free credit reports are available if: - ANSWER -you have reason to believe your file
contains inaccurate information due to fraud
-you've been denied credit, insurance or employment within the last 60 days
-you are receiving public assistance
Establishing credit - ANSWER Open checking and savings accounts.
Having a cell phone and utilities billed in your name.
Get one card and make small purchases.
Ask a bank for a small, short-term cash loan.
Stay current on your student loans.
Solutions 2025
Good uses of credit - ANSWER 1. Convenience
2. Meet financial emergencies
3. Make reservations
4. Purchase "big ticket" items
5. Taking advantage of free credit
6. Obtain an education
Installment credit (closed end credit) - ANSWER borrower must repay the amount owed
plus interest in a specific number of of equal payments, usually monthly.
Non installment credit - ANSWER single payment, open ended credit, and service credit
Open ended credit - ANSWER pre-approved loan between a financial institution and
borrower that may be used repeatedly up to a certain limit and can subsequently be
paid back prior to payments coming due
Continuous debt method - ANSWER unable to get out of debt every four years,
developing cycle
-approach for determining debt limit
- ANSWER
Downside of credit - ANSWER -Use of credit reduces financial flexibility and buying
power
-Make impulse purchases and could lead to overspending
,-Financially overstretched
-Interest can be costly
Interest on credit is usually expressed in terms of: - ANSWER APR (Annual Percentage
Rate)
Monthly payments are made up of a portion of the _________ and interest - ANSWER
original loan
One way to lower the total cost of borrowing is by: - ANSWER increasing the monthly
amount you pay
What is a credit report? - ANSWER Your credit report is a record of how you have
borrowed and repaid debts.
-An up-to-date, reasonably objective description of the status of many of your credit
accounts.
"Big 3" credit reporting agencies - ANSWER Equifax
Experian
TransUnion
A credit report includes: - ANSWER -Identifying Information
-Credit Accounts
-Inquiries
-Public Record and Collection Items
Effects of credit score - ANSWER Single most important factor determining approval
, -Bad score = high interest
Ignoring your credit score could - ANSWER cost you money
Your credit _____ is your credit _____ - ANSWER past; future
Who can see your credit report? - ANSWER Creditors
Employers
Government agencies
Insurance companies
Landlords
Free credit reports are available if: - ANSWER -you have reason to believe your file
contains inaccurate information due to fraud
-you've been denied credit, insurance or employment within the last 60 days
-you are receiving public assistance
Establishing credit - ANSWER Open checking and savings accounts.
Having a cell phone and utilities billed in your name.
Get one card and make small purchases.
Ask a bank for a small, short-term cash loan.
Stay current on your student loans.
