April is Financial Literacy Month, an annual event aimed at highlighting financial literacy among Americans and educating them on adopting positive financial habits.
One component of personal finance is credit. How would you rate yourself on credit knowledge? See if you can answer the following 10 questions. You can find the correct answers at the bottom:
1. What is the lowest credit score that generally falls within a “good” range?
2. You visited www.annualcreditreport.com and obtained a free copy of your credit reports, but you see something related to an account you have that you believe may be inaccurate or incomplete. What should you do?
a. Nothing; it’s no big deal
b. Let creditors know the next time you apply for credit
c. Contact the lender or creditor reporting the information
3. If you don’t carry a balance on a credit card and haven’t used it in a while, a lender or creditor may consider the account inactive and close it.
4. How long can a late payment stay on your credit reports?
a. 6 months
b. 5 years
c. 7 years
5. What is debt-to-credit ratio?
a. How many credit cards you have
b. The amount of credit you’re using compared to the total amount available to you
c. The average credit limit on your accounts
6. Which of the following are factors that may impact credit scores?
a. Your payment history
b. The length of your credit history
c. The types of accounts you have
d. All of the above
7. The three nationwide credit bureaus make the lending decisions when you apply for credit.
8. Checking your own credit reports will impact your credit scores.
9. How many nationwide credit bureaus are there in the United States?
10. If you are an authorized user on someone else’s credit card account, you are not contractually responsible for paying the bill.
1. A-670. While each of the numbers listed would generally fall into the “good,” “very good,” or “excellent “ range, credit scores from 670 to 739 are generally considered good. Learn more.
2. C-Contact the lender or creditor reporting the information. If you see something on your credit reports you believe may be inaccurate or incomplete, contact the lender or creditor. You can also file a dispute with Equifax. Learn more.
3. A-True. Accounts may be deemed inactive after a certain period of time, which depends on the policy from the lending institution. Learn more.
4. C-7 years. Although some types of bankruptcy may stay on credit reports for up to 10 years, most information considered negative, such as late payments, will stay on credit reports for 7 years. Learn more.
5. B-Your debt-to-credit ratio is the amount of credit you’re using compared to the total amount available to you. In general, lenders and creditors prefer to see a lower debt-to-credit ratio. Learn more.
6. D-All of the above. These are all factors used in calculating credit scores, keeping in mind there are a number of credit scoring models. Learn more.
7. B-False. The nationwide credit bureaus do not make lending decisions. They provide lenders and creditors with information they use to help them make lending decisions based on their lending criteria. Learn more.
8. B-False. Checking your own credit reports will not impact your credit scores. These are “soft” inquiries, as opposed to “hard” inquiries – when a company views your credit reports in response to your application. Learn more.
9. B-3. There are three nationwide credit bureaus – Equifax, Experian, and TransUnion.
10. A-True. Authorized users aren’t legally responsible for paying the balance on the account, but their credit reports and credit scores may be impacted if the account isn’t paid as agreed. Learn more.
The information contained in this blog post is designed to generally educate and inform visitors to the Equifax Finance Blog. The blog posts do not give, and should not be assumed to provide, personalized tax, investment, real estate, legal, retirement, credit, personal financial, or other professional advice. Before making any financial decision, you should always consult with the appropriate professionals who can explain your options, rights, and legal responsibilities, and advise you on any tax, legal, credit, or business implications that may result from those decisions. The views and opinions expressed by the authors of blog posts are their own views and may not be the views or opinions of Equifax, Inc. and/or its affiliates.