The 7-Question Credit IQ Test: Can You Pass It?

Credit cards

Credit cards | Source: iStock

You may have a few credit cards in your wallet but do you really understand how credit works? Not understanding the ins and the outs of credit can have very bad results. In order to obtain an excellent credit score you’ll need to understand exactly how credit works as well as the major do’s and don’ts of credit management. Knowledge is definitely power when it comes to your plastic.

The Cheat Sheet created this handy quiz to help you test your credit know-how. Let’s get started.

1. What does a credit score tell potential lenders?

A. Your total amount of debt.
B. How much money you have.
C. Your likelihood of repaying a loan.
D. Your net worth.

2. A potential employer can see your credit score _______.

A. When they do a background check for employment.
B. Once your résumé and employment application is received.
C. Only after you accept a job offer.
D. An employer does not have access to your credit score.

3. A chapter 7 bankruptcy filing stays on your credit report for ______ years.

A. Seven
B. 10
C. Two
D. 14

4. You can raise your credit score by_______.

A. Paying on time.
B. Paying down debt.
C. Fixing credit report errors.
D. All of the above

5. You are entitled to receive a free copy of your credit report every ________.

A. 12 months
B. Two years
C. Seven years
D. You are not entitled to a free credit report.

6. Your credit score can decline after _________ late payment(s).

A. Three
B. One
C. Two
D. Four

7. When you get married:

A. You and your spouse get revised credit scores.
B. Your credit history becomes merged with your spouse’s credit history.
C. Your credit report will not change unless you open a joint account or you allow your spouse to become an authorized user on a credit card.
D. You and your spouse receive a combined credit score.

Answers

Online shopping with a credit card

Online shopping | Source: iStock

1. What does a credit score tell potential lenders?

Answer: C
Your likelihood of repaying a loan. Your credit score will give potential lenders a glimpse into how responsible you are with money as well as how risky it would be for them to extend credit to you. Generally, a bad credit score (when it comes to the base FICO scoring system, this would be anything below 500 on a scale of 300 to 850) indicates that you’re having difficulty paying bills on time or at all.

2. A potential employer can see your credit score _______.

Answer: D
An employer cannot access your credit score, only your report. Employers receive an amended version called an employment credit report.

3. A chapter 7 bankruptcy filing stays on your credit report for ______ years.

Answer: B
A chapter 7 bankruptcy filing, which wipes most of your debt clean, stays on your credit report for 10 years. A chapter 13 bankruptcy filing, which requires repayment of some of the debt, stays on your credit report for 7 years.

4. You can raise your credit score by_______.

Answer: D
All of the above. You can raise your credit score by paying in full and on time, keeping balances low, and fixing credit report errors.

5. You are entitled to receive a free copy of your credit report every ________.

Answer: A
Twelve months. Under the Fair Credit Reporting Act, consumers are entitled to one free credit report from each of the three major credit reporting agencies (Experian, Equifax, and TransUnion).

6. Your credit score can decline after _________ late payment(s).

Answer: B
One. All it takes is a single late payment for your credit score to become affected. In one example given by Experian, if you’re just 30 days late, your score could drop by as much as 110 points even if you have a FICO score of 780 and you’ve never missed a payment before.

7. When you get married:

Answer: C
Your credit report will not change unless you open a joint account or your spouse is an authorized user. There is no such thing as a combined credit score.

How did you do? If you didn’t do well on this quiz, don’t worry. You can build your credit knowledge by reading books and visiting the websites of the three major credit reporting agencies. Each of them have an education center with basic knowledge about credit and how it works. You can also visit the National Foundation for Credit Counseling’s website, which has a section with consumer tips.

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