Debt is a major player in the world of credit, accounting for 30 percent of your credit score. So, how much do you know about the fundamentals of debt? Take the quiz to learn where you rank.
1. “Good debt” has:
a. Minimum payment options
b. A low interest rate
c. An easy approval process
d. Tax benefits
2. All debt is bad for your credit score, no matter how small or large.
3. Secured debt is:
a. Backed by collateral
b. An option that requires no down-payment
c. Guaranteed by the government
d. Credit card debt that is paid in full every month
4. Paying the minimum amount is the best way to reduce credit card debt.
5. Debt consolidation will:
a. Lower your interest rate
b. Help you reduce debt faster
c. Simplify the payment process
e. All of the above
6. Debt settlement will affect your credit score.
7. Debt management requires:
a. A solid budget
b. Maintaining a low credit utilization ratio
c. Avoiding risky deals which may include cosigning, payday loans and high interest rates
d. All of the above
8. Filing for bankruptcy will eliminate all types of debt.
9. Types of installment debt include:
a. Credit card balances
b. Department store layaway plans
c. Mortgages and student loans
d. Payday loans
10. In general, you should apply for a mortgage that costs no more than ______ your annual income.
a. three times
b. four times
c. five times
Answers: 1-f; 2-b; 3-a; 4-b; 5-d; 6-a; 7-d; 8-b; 9-c; 10-a
7-10 Correct Answers: Debt Savvy. Debt is a tool in your financial life, not a liability. You understand how to harness buying power into long-term success and credit strength. Keep it up!
4-6 Correct Answers: Debt Stable. You may not be a debt expert, but you understand the fundamentals. You probably have a decent credit score and credit utilization ratio, but there’s always room for improvement. Review the blog and keep honing your skills. You’ll make it to the 800 Club in no time.
1-3 Correct Answers: Debt Zero. Debt is a mystery to you and you’ve probably experienced your fair share of financial setbacks. Don’t give up; seek an education! Learn more about debt basics and talk to our professionals about how they affect your credit score. It’s never too late to make a change.