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We know that having a good credit score is important. But what exactly is a credit score, how is it calculated, and how does it affect your credit report?
Take this quiz to see how well you understand your
credit score.
How well do
you know your credit score?
Your credit score is a number that ranges from 300 - 900. Although 650 is considered fair, your number shows lenders how creditworthy you are, so the higher the number, the better. Note that an average or even a good credit score doesn't always guarantee that you'll be approved for credit, since every lender has their own lending criteria.
Answer +
a) 650
b) 750
c) 850
d) All of the above
a) 650
b) 750
c) 850
d) All of the above
What's considered a good credit
score?
Q1
d) All of the above
c) 850
b) 750
a) 650
Your credit score is based on five categories with different percentages. The biggest factors are your payment history (35%), used credit vs. available credit (30%), and the length of your credit history (15%). New credit accounts and the different types of credit you use each account for 10%. If you use credit responsibly, your credit score will likely be in good standing.
f) All of the above
e) The types of credit used
d) New credit accounts
c) The length of your credit history
b) How much you owe
a) Your payment history
Answer +
What factors are involved in the calculation of your credit score?
Q2
a) Your payment history
b) How much you owe
c) The length of your credit history
d) New credit accounts
e) The types of credit used
f) All of the above
a) Your payment history
b) How much you owe
c) The length of your credit history
d) New credit accounts
e) The types of credit used
f) All of the above
It's true, as long as you make the minimum payment when your credit card bills arrive each month, your credit score shouldn't drop. That being said, it's a good idea to pay off your full balance every month so you can avoid paying any interest charges.
False
True
False
True
Answer +
False
True
Making just the minimum payment on your credit card won't hurt your credit score
Q3
False. A good credit score is just one of the criteria lenders look at when deciding if they they want to offer you a loan or mortgage. Other considerations include the amount of debt you currently have, your income, your employment history, and much more.
False
True
False
True
False
True
Answer +
Having a good credit score guarantees that you'll be approved for a loan or mortgage
Q4
More Detail -
Hire a Financial Advisor: Some advisors only provide advice on your portfolio, leaving them uncompetitive against automated, cheaper, investment services. Others who practice financial planning may provide more comprehensive advice that looks at budgeting, insurance, estate planning, taxation, and more. This might actually require more involvement from you, in order to provide accurate information, but the number crunching and recommendations are still handled by the advisor.
Automated Investment Service: The newer, often called robo advisors fall into this category, but really this type of service has been around for a long time. An investor opens an account online, fills out a questionnaire, and a turnkey portfolio is recommended and implemented for the investor. These services cost less than using a financial advisor.
DIY: Managing everything yourself obviously means that you are responsible for selecting all of the holdings that make up your portfolio, as well as the ongoing monitoring and rebalancing. But note that this may not necessarily be the lowest cost. Many DIY investors trade actively, and transaction costs can add up.
When you apply for a new credit card, the provider will perform a hard inquiry on your credit report to see how creditworthy you are. This hard check would lower your credit score by a few points. When it comes to checking your credit score or getting pre-approved for a mortgage, a soft check would be performed which has no impact on your credit score.
c) Getting pre-approved for
a mortgage
b) Applying for a new credit card
a) Checking your credit score
c) Getting pre-approved for
a mortgage
b) Applying for a new credit card
a) Checking your credit score
c) Getting pre-approved for
a mortgage
b) Applying for a new credit card
a) Checking your credit score
Answer +
Which of the following affects your credit score?
Q5
False
True
False
True
False. Although the record of your bankruptcy will stay on your credit report for quite a few years, it's possible to rebuild your credit score right away. You'll likely have to get a secured credit card which requires a security deposit, but as long as you're making your payments on time, it'll get reported to the credit bureaus in a positive way.
If you've declared bankruptcy, you'll never have a good credit score again
Q6
Answer +
False
True
False. Both Equifax and TransUnion (the credit reporting bureaus) offer a free credit report once per year. By applying to both bureaus, you'll get a clear picture of your credit profile since some lenders only report to one of the bureaus.
False
True
False
True
Answer +
You have to pay to access your credit report
Q7
False
True
Generally speaking, negative information stays on your credit report for 6 years from the last date of activity. However, TransUnion and Equifax may keep some information on file for a shorter or longer period of time.
3 years
6 years
10 years
3 years
6 years
10 years
Answer +
How long does negative information
stay on your credit report?
Q8
10 years
6 years
3 years
Learn More
five tips to improve your credit score.
Congratulations! Knowledge quiz successfully completed.
Next step: do your best to keep your credit score high.
Try not to be intimidated. It's all about understanding what it is, how it's calculated and how it affects your credit report.
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