FHCE TEST 3 UPDATED QUESTIONS AND ANSWERS
Balance owed/Revolving Balance(credit) - CORRECT ANSWER✅✅if you carry balance from month to
month on your credit card; compound interest is calculated in revolving credit
Interest rate determining finance charge - CORRECT ANSWER✅✅APR interest rate paid over the life of
the loan
Teaser rates - CORRECT ANSWER✅✅intro rates that attract new customers, can be as low as 0%; most
credit cards compound interest on a monthly basis (APR/12)
Cash advance - CORRECT ANSWER✅✅BAD; interest rate begins immediately and may be at a higher
rate than for purchases; usually cash adv fee
Grace period - CORRECT ANSWER✅✅20-25 days excluding cash advances; doesn't apply if you carry a
balance; not all offer this
Fees - CORRECT ANSWER✅✅range $0-100, amex is $300; cash adv fee, late fee $35, over limit fee $35,
2010 Act only $25
Credit Bureau - CORRECT ANSWER✅✅collects and reports info from creditors, public court records, and
the consumer; credit scoring
Info on credit report - CORRECT ANSWER✅✅personal demographics, employment history, criminal
convictions, credit repayment, previous 2 years of inquiries by creditors
National Credit Reporting Bureau - CORRECT ANSWER✅✅equifax credit info services, experian,
transunion
5 C's of Credit: Character - CORRECT ANSWER✅✅responsibility toward debt repayment; job stability,
homeowner/rental length; low debt load
, 5 C's of Credit: Capacity - CORRECT ANSWER✅✅ability to repay debt; current level/source of income;
level of borrowing(how many lines of credit you have); level of non-obligated income; debt including
mortgage should be less than 36% of income
5 C's of Credit: Captial - CORRECT ANSWER✅✅size of financial holdings: investment, savings, checking,
income, assets
5 C's of Credit: Collateral - CORRECT ANSWER✅✅assets or property secured to obtain credit; creditor
has title or deed; if you default asset is sold to repay debt; usually your home, boat, car
5 C's of Credit: Conditions - CORRECT ANSWER✅✅extraneous factors that impact your ability to repay
debt: unemployment rate, discount rate, inflation rate
Consumer Loans Type 1 - CORRECT ANSWER✅✅single payment(balloon) vs installment(amortized)
amortized - CORRECT ANSWER✅✅principle and interest
Consumer Loans Type 2 - CORRECT ANSWER✅✅secured(car loan which is secured by car itself) vs
unsecured(student loan)
Consumer Loans Type 3 - CORRECT ANSWER✅✅Variable rate(tied to national rate) vs fixed rate
Who determines the national rate? - CORRECT ANSWER✅✅Federal Reserve Bank
Conditions of the loan - CORRECT ANSWER✅✅-APR
-Number of payments
-total amount financed(principle)
-how interest is calculated
Balance owed/Revolving Balance(credit) - CORRECT ANSWER✅✅if you carry balance from month to
month on your credit card; compound interest is calculated in revolving credit
Interest rate determining finance charge - CORRECT ANSWER✅✅APR interest rate paid over the life of
the loan
Teaser rates - CORRECT ANSWER✅✅intro rates that attract new customers, can be as low as 0%; most
credit cards compound interest on a monthly basis (APR/12)
Cash advance - CORRECT ANSWER✅✅BAD; interest rate begins immediately and may be at a higher
rate than for purchases; usually cash adv fee
Grace period - CORRECT ANSWER✅✅20-25 days excluding cash advances; doesn't apply if you carry a
balance; not all offer this
Fees - CORRECT ANSWER✅✅range $0-100, amex is $300; cash adv fee, late fee $35, over limit fee $35,
2010 Act only $25
Credit Bureau - CORRECT ANSWER✅✅collects and reports info from creditors, public court records, and
the consumer; credit scoring
Info on credit report - CORRECT ANSWER✅✅personal demographics, employment history, criminal
convictions, credit repayment, previous 2 years of inquiries by creditors
National Credit Reporting Bureau - CORRECT ANSWER✅✅equifax credit info services, experian,
transunion
5 C's of Credit: Character - CORRECT ANSWER✅✅responsibility toward debt repayment; job stability,
homeowner/rental length; low debt load
, 5 C's of Credit: Capacity - CORRECT ANSWER✅✅ability to repay debt; current level/source of income;
level of borrowing(how many lines of credit you have); level of non-obligated income; debt including
mortgage should be less than 36% of income
5 C's of Credit: Captial - CORRECT ANSWER✅✅size of financial holdings: investment, savings, checking,
income, assets
5 C's of Credit: Collateral - CORRECT ANSWER✅✅assets or property secured to obtain credit; creditor
has title or deed; if you default asset is sold to repay debt; usually your home, boat, car
5 C's of Credit: Conditions - CORRECT ANSWER✅✅extraneous factors that impact your ability to repay
debt: unemployment rate, discount rate, inflation rate
Consumer Loans Type 1 - CORRECT ANSWER✅✅single payment(balloon) vs installment(amortized)
amortized - CORRECT ANSWER✅✅principle and interest
Consumer Loans Type 2 - CORRECT ANSWER✅✅secured(car loan which is secured by car itself) vs
unsecured(student loan)
Consumer Loans Type 3 - CORRECT ANSWER✅✅Variable rate(tied to national rate) vs fixed rate
Who determines the national rate? - CORRECT ANSWER✅✅Federal Reserve Bank
Conditions of the loan - CORRECT ANSWER✅✅-APR
-Number of payments
-total amount financed(principle)
-how interest is calculated
