UGBA 135 MIDTERM EXAM QUESTIONS
AND ANSWERS. VERIFIED 2025/2026.
FICO Score - ANS measure of consumer credit risk
Highest FICO Score - ANS 850
Factors determining FICO Score - ANS 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? - ANS 3
How do you establish good credit? - ANS borrow $ and pay it back on time according to its
terms
How much is taken out of your paycheck for SS and Medicare? - ANS -12.4% of earned
income to SS
-2.9% of earned income to Medicare
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,Debt-to-credit ratio - ANS 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 - ANS -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? - ANS the excess is used to pay off debt of highest interest rate, not the card with
the smallest balance
credit hold on account - ANS -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 - ANS no legal maximum
Who can see your credit scores? - ANS
Website for free credit report (federally mandated for credit reports) -
ANS annualcreditreport.com
Three credit scoring agencies - ANS Transunion (tuc.com) -- Empirica score
Equifax (equifax.com) -- Beacan score
Experian (experian.com) -- Experian model
Best time to establish credit - ANS when you don't need it
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, aka younger i thinks
When are your credit payments due? - ANS generally about 21-25 days after your billing cycle
ends
Secure vs unsecure line of credit - ANS 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? - ANS -can lower because
it will increase your d/c ratio
-if you cancel, cancel newest card first
Prepaid cards - ANS -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 - ANS -using your credit card to withdraw cash
-higher interest rates, no grace period (incur interest rates right off the bat)
grace period - ANS set length of time after the due date during which payment may be made
without penalty
What is a retail charge card? - ANS -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
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
AND ANSWERS. VERIFIED 2025/2026.
FICO Score - ANS measure of consumer credit risk
Highest FICO Score - ANS 850
Factors determining FICO Score - ANS 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? - ANS 3
How do you establish good credit? - ANS borrow $ and pay it back on time according to its
terms
How much is taken out of your paycheck for SS and Medicare? - ANS -12.4% of earned
income to SS
-2.9% of earned income to Medicare
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,Debt-to-credit ratio - ANS 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 - ANS -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? - ANS the excess is used to pay off debt of highest interest rate, not the card with
the smallest balance
credit hold on account - ANS -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 - ANS no legal maximum
Who can see your credit scores? - ANS
Website for free credit report (federally mandated for credit reports) -
ANS annualcreditreport.com
Three credit scoring agencies - ANS Transunion (tuc.com) -- Empirica score
Equifax (equifax.com) -- Beacan score
Experian (experian.com) -- Experian model
Best time to establish credit - ANS when you don't need it
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, aka younger i thinks
When are your credit payments due? - ANS generally about 21-25 days after your billing cycle
ends
Secure vs unsecure line of credit - ANS 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? - ANS -can lower because
it will increase your d/c ratio
-if you cancel, cancel newest card first
Prepaid cards - ANS -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 - ANS -using your credit card to withdraw cash
-higher interest rates, no grace period (incur interest rates right off the bat)
grace period - ANS set length of time after the due date during which payment may be made
without penalty
What is a retail charge card? - ANS -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
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
