Credit Score Basics
What is a credit score?
A number that shows how responsible you are with borrowing money.
Which factor affects your credit score the most?
Answer: Payment history
Name one way to build credit.
Answer: Pay on time, keep balances low, use credit responsibly.
What does APR stand for?
Answer: Annual Percentage Rate
What is the principal of a loan?
Answer: The amount of money borrowed.
What is the credit score range?
Answer: 300–850
What percentage of your credit score is based on payment history?
Answer: 35%
How can opening a credit card help build credit?
Answer: It builds credit history if used responsibly.
How does a lower credit score affect interest rates?
Answer: It increases interest rates.
What does loan term mean?
Answer: How long you have to repay the loan.
300: What does a higher credit score tell lenders?
Answer: You are a safer, lower-risk borrower.
: What rule should you follow to keep your credit card balance low?
Answer: Use less than 30% of your credit limit.
Name one bad habit that hurts your credit score.
Answer: Late payments, maxing out cards, only paying the minimum.
Two people buy the same car, but one pays more. Why?
Answer: Different credit scores lead to different interest rates.
What happens to the total cost of a loan when the loan term is longer?
Answer: The total cost increases.
What does creditworthiness mean?
How trustworthy or safe you are to lend money to.
Why can closing your oldest credit card hurt your credit score?
Answer: It shortens your credit history.
Why is paying only the minimum payment on your credit card risky?
Answer: It increases interest and keeps you in debt longer.
What costs more over time: a high interest rate or a low interest rate?
Answer: A high interest rate.
Why do people often choose longer auto loans?
Answer: Lower monthly payments.
True or False: Your credit score only matters for credit cards.
Answer: False
What credit score factor is affected when you apply for too many credit cards?
Answer: New credit
What is the safest way to use a credit card?
Answer: Pay the full balance every month.
Why can a low monthly payment be misleading?
Answer: It may mean a longer loan and more total interest paid.
Which borrower usually pays the most for a car?
Answer: A borrower with bad credit and a high interest rate.