FFC Debt and Credit Management — Questions and Answers
Question 1: What is a credit score used for?
- Track savings
- Evaluate creditworthiness (Correct answer)
- Reduce insurance
- Determine taxes
Correct answer: Evaluate creditworthiness
Lenders use it to assess a person's creditworthiness.
Question 2: Which strategy reduces credit card debt effectively?
- Make minimum payments
- Ignore statements
- Pay more than the minimum balance (Correct answer)
- Transfer balance often
Correct answer: Pay more than the minimum balance
Paying more than the minimum reduces the principal faster.
Question 3: What is a key component of debt management?
- Ignore bills
- Only consolidate
- Develop a structured repayment plan (Correct answer)
- Use all credit
Correct answer: Develop a structured repayment plan
Creating a repayment plan helps reduce debt systematically.
Question 4: What happens with late credit payments?
- They boost credit
- They are ignored
- They lower credit scores and add penalties (Correct answer)
- They reduce interest
Correct answer: They lower credit scores and add penalties
Late payments negatively affect credit scores and may incur fees.
Question 5: Which tool helps track debt and payments?
- Investment tracker
- Expense report
- Debt payoff calculator (Correct answer)
- Budget chart
Correct answer: Debt payoff calculator
Debt payoff calculators aid in visualizing progress.
Question 6: How can you improve a poor credit score?
- Max out credit cards
- Apply for new loans
- Make on-time payments consistently (Correct answer)
- Close all accounts
Correct answer: Make on-time payments consistently
Paying bills on time is a major factor in credit score improvement.
Question 7: What is a debt-to-income ratio?
- Tax calculation
- Income-to-savings ratio
- Ratio of debt payments to income (Correct answer)
- Credit utilization score
Correct answer: Ratio of debt payments to income
It compares monthly debt payments to gross income.
Question 8: Why should credit reports be reviewed regularly?
- To apply for loans
- To increase spending
- To catch errors or fraud early (Correct answer)
- To file taxes
Correct answer: To catch errors or fraud early
To detect errors and prevent identity theft.
Question 9: What is credit counseling?
- Investment consulting
- Guidance on managing and reducing debt (Correct answer)
- Tax filing help
- Loan sales
Correct answer: Guidance on managing and reducing debt
It provides advice and tools to manage debt responsibly.
FFC Debt and Credit Management
What is a credit score used for?