The first step toward improving your credit is improving your credit knowledge. We’ve put together this fun, five-minute quiz to test your credit know-how. Learn how your credit score works and how to build and maintain the credit you need to achieve financial empowerment!
The Answers
The first step toward improving your credit is improving your credit knowledge. We’ve put together this fun, five-minute quiz to test your credit know-how. Learn how your credit score works and how to build and maintain the credit you need to achieve financial empowerment!
Question 1: Which of these scores would be considered a ‘good’ credit score?
735 is correct! FICO scores range from 300–850. Most financial experts consider anything over 700 a good score.
Read more: What is a Good Credit Score?
Question 2: Closing old or unused credit cards is a quick way to boost your credit score.
False is correct! Credit utilization, or the percentage of available credit that you’re using at any given time, plays a major role in your credit score. Keeping unused credit cards open means you’re using a lower percentage of your available credit. In addition, the age of your accounts plays a factor as well. However, this strategy is best if you can avoid the temptation to use available credit. You’ll also want to monitor unused accounts for potential identity theft.
Read more: The Journey to Financial Empowerment
Question 3: Which of these factors does NOT affect your credit score?
Income is correct! Your credit score is calculated based on almost all aspects of how you utilize, pay off, and manage credit, but your income is not a factor.
Read more: Six Tips That Could Improve Your Credit Score
Question 4: Paying off delinquent accounts (accounts where the payment is past due) immediately removes them as a negative on your credit score.
False is correct! Paying off a delinquent account will improve your credit payment history immediately. However, it takes 7 years for delinquent accounts to disappear from your credit report. If you’re struggling to make ends meet, a reputable credit counselor can often help negotiate a way for you to pay off delinquent accounts.
Read more: How to Give Yourself a Financial Checkup
Question 5: Which of the following organizations may use your credit score to make decisions?
All of the above (except where prohibited by law) is correct! Your credit score affects more in your life than just your ability to obtain credit. Utilities look at your credit when calculating your service deposit. Employers often check your credit as part of the application process. Landlords check the credit of potential tenants. And insurance companies may check your credit as part of determining your risk.
Read more: What is a Credit Score? All Your Credit Questions Answered.
Question 6: You take out a $25,000 car loan to be paid back over 60 months. If you have good credit, they offer a 3.9% APR. However, if your credit is average, they offer a 9.9% APR. If offered the higher rate, approximately how much more will you pay in interest over the life of the loan?
$3,000-5,000 is correct! Good credit can save you a huge chunk of change; in this example, the difference in total interest paid over the life of the loan adds up to around $4,000!
7: How can you improve your credit score (or maintain your high credit score?)
All of the above is correct! All of these steps are important to maintain or improve your score. Making late payments or letting your debt spike can lower a good score, but following these three steps can result in a steady improvement over time.
Read more: How to Manage Credit Card Debt Wisely in 9 Easy Steps.
Final Score:
7 right: PERFECT! You’re a credit dynamo! With your credit knowledge, you should take advantage of opportunities like a personal loan to accomplish your financial goals. Personal loans provide funds for needs such as vacation, home improvement, debt consolidation, or baby/adoption expenses with a set interest rate and structured payback.
4-6 right: Good job! You’ve got a better-than-average understanding of how credit works. With tools like a home equity line-of-credit (HELOC) at your disposal, you can use this knowledge to achieve all your financial goals!
0-3 right: You’re still developing your credit expertise — and that’s okay! You’re here taking our quiz and boosting your knowledge. Plus, with Prosper’s blog you have plenty of material to help you become a personal finance wiz! Check out Prosper’s financial tools and learn how to consolidate your debt and build a strong credit history!
Read more: Personal Loans and Your Credit Score
The post How’s Your Credit Score Knowledge? appeared first on Prosper Blog.