Quiz with answers

1. You may receive a free credit score each year from each of 3 credit reporting agencies.

Answer: False

You may receive a free credit report, but it will not include your credit score, which costs about $15. If you decide to pay for a score, be careful that you do not sign up for a regular report with a monthly fee. The introductory rate may be as low as $8, but when you multiply that by several months, it’s no bargain, and there will probably be little if any change in your credit score each month.

2. Ben saves $1,000 a year from age 15 to 25 and then adds nothing more to his savings until retirement at age 65. George saves nothing until age 40, and then saves $10,000 a year from age 40 to 65. 

Assuming the same investment returns, the two men will be equally well off.

Answer: False
Ben will be better off because the interest compounded on $10,000 (the same amount George saved in one year) will net Ben $1.6 million at retirement. George scrimped for 25 years to invest a quarter million dollars, and ends up with just under $1 million.

3. The current savings rate for Americans is -0.05%. 

Answer: False       
The savings rate is closer to  2%, which is paltry compared to other countries’ rates of 12 to 15%. Only 3 out of 5 American families spend less than they earn. However, the negative  savings statistic that is widely circulated does not include pension and Social Security savings, or the increased values of stocks and home ownership.

4. Your credit score can affect  your ability to get car loans, credit cards, insurance rates, mortgages, and even jobs.

Answer: True 

You may get the loans and credit cards, but they will be at higher rates with extra fees tacked on. Employers now often consider credit scores of potential employees because scores can indicate a lack of responsibility and/or potential for abuse of resources by the employee.

5. An interest-only mortgage can keep monthly payments lower, and will therefore make home ownership more affordable for many.

Answer: False

Although an interest-only mortgage sounds appealing at first, the principle isnot being reduced, and in five years when you must begin paying the principle, interest rates become variable and could increase by 2 percentage points every 6 months. The amount of your monthly payment could explode!

6. Making one credit card payment 30 days late will not affect your credit score.

Answer: True

Most companies allow one grace period of 30 days. However, repeated 30-day delinquencies or a payment that is 90 days late will lower your credit score and remain on your credit report for up to seven years.

7. Credit card debt is the main cause of bankruptcy in America.

Answer: False

Large medical expenses and family disruption such as divorce are major causes of bankruptcy in America. Some kinds of debt can enhance your financial security. True. Mortgage debt and student loans will, in the long run, increase the value of your assets. However, keeping both of those kinds of debt within a range you can easily pay plays an important role in your financial security.

8. Some kinds of debt can enhance your financial security.

Answer: True.
Mortgate debt and student loans will, in the long run, increase the value of your assets. However, keeping both of those kinds of debt within a range you can easily pay plays an important role in your financial security.

9. The income gap between rich and poor is equally reflected in their assets.

Answer: False

The gap in assets between rich and poor far outstrips income differences. Low-income Americans often fail to plan for the future and get caught in late payment charges, overdraft fees, etc., which deplete any reserves for asset accumulation.

10. Financial education for low-income families should be a high priority for all of us.

Answer: True

The well-being of all our families affects each community. Families that are satisfied with their lifestyle, feel confident in their ability to meet their needs, and are prepared for life events will not be a drain on the community in terms of housing, medical, and social needs. They will be healthy participants in a healthy community.

11. Seeking the help of a credit repair company can be the best solution when credit has become a burden to your lifestyle.

Answer: False.

Some companies use illegal techniques (such as disputing a claim on your record that you know is correct), and others seek payment before they provide any service. Credit repair companies can do little more than what you can do for yourself:
(1) Start paying bills on time, at least minimum payments.
(2) Do not apply for new credit until current debt is repaid.
(3) Reduce current expenses.
(4) Increase income by working overtime, getting a second job, or having a non-working spouse go to work. Apply the extra income to debt repayment.

12. Using a debit card is always smarter than using a credit card.

Answer: False
A debit card is best used for small or routine items like gasoline or groceries that you know you will not return. Credit cards are the best choice for large-ticket items or for merchandise bought on the Internet or by phone, because you have far more purchase protection. If you pay off the balance each month, you have used your credit card wisely.

13. Deleting spam and phishing e-mails is the best way to protect yourself from identity theft.

Answer: False

You should forward those e-mails to spam@uce.gov, or reportphishing@antiphishing.org. If a phising e-mail has an attachment, do not open it. If the e-mail links to a website, do not go to it, and never enter information.

14. You can stop companies from sending pre-approved credit card applications.

Answer: True

Call1-888-5-opt-out (1-888-567-8688) to opt out of pre-approved credit card offers.

SCORE
1-7 correct, better hit a web URL on p. 29 or attend a UI Extension finance class;

8 to 10 correct, OK, but continued education will help;

11 to 14, great job!

Thanks to the following people who contributed information and reviewed content in this quiz: Jeanne Hogarth, Federal Reserve Board  program manager for consumer education and research; Marilyn Bischoff, Boise, UI Extension family economist; Marsha Lockard, Canyon County UI Extension FCS educator; Ginny Junk, Moscow, University of Idaho Family and Consumer Sciences faculty.