Credit Score Basics Pre-Quiz

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| By Greenpath

Greenpath

Community Contributor

Quizzes Created: 2 | Total Attempts: 1,931

Questions: 5 | Attempts: 1,308 | Updated: Mar 20, 2023

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Questions and Answers

1.

Which is the most important factor in determining a credit score?
- A.
  
  Payment History
- B.
  
  Amount Owed
- C.
  
  Length of Credit History
- D.
  
  Type of Credit in Use
Correct Answer
A. Payment History

Explanation
Payment history is the most important factor in determining a credit score because it reflects an individual's ability to make timely payments on their debts. Lenders and creditors use this information to assess the risk of lending money to someone. A consistent record of on-time payments demonstrates responsible financial behavior and indicates that the borrower is likely to repay their debts in the future. On the other hand, missed or late payments can negatively impact a credit score and signal a higher risk of defaulting on future obligations. Therefore, payment history plays a crucial role in evaluating an individual's creditworthiness.

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2.

The secret to cleaning up a poor credit score is by
- A.
  
  Leaving it alone.
- B.
  
  Removing negative items and adding positive items.
- C.
  
  Asking a lender to look at your credit report.
- D.
  
  All of the above.
Correct Answer
B. Removing negative items and adding positive items.

Explanation
The correct answer is removing negative items and adding positive items. This is because negative items, such as late payments or collections, can significantly impact a credit score. By removing these negative items, either through negotiating with creditors or disputing inaccurate information, a person can improve their credit score. Additionally, adding positive items, such as making on-time payments or opening new lines of credit responsibly, can also help to improve a credit score over time.

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3.

Your credit score can affect your auto insurance rates.
- A.
  
  True
- B.
  
  False
Correct Answer
A. True

Explanation
Your credit score can affect your auto insurance rates because insurance companies use credit-based insurance scores to determine the likelihood of a person filing a claim. Studies have shown that individuals with lower credit scores tend to file more insurance claims, leading insurance companies to charge higher premiums for those individuals. This is because insurance companies consider individuals with lower credit scores to be higher-risk customers. Therefore, having a good credit score can help you get lower auto insurance rates.

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4.

The highest FICO credit score is
- A.
  
  900
- B.
  
  750
- C.
  
  850
- D.
  
  700
Correct Answer
C. 850

Explanation
The highest FICO credit score is 850. FICO scores range from 300 to 850, with 850 being the highest possible score. This score is considered excellent and indicates a very low risk of defaulting on credit obligations. It signifies a strong credit history and responsible credit management. Lenders and financial institutions generally view individuals with a FICO score of 850 as highly creditworthy and are more likely to offer them favorable loan terms and interest rates.

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5.

Your credit score is always changing.
- A.
  
  True
- B.
  
  False
Correct Answer
A. True

Explanation
Credit scores are dynamic and can change over time based on various factors such as payment history, credit utilization, length of credit history, new credit inquiries, and types of credit used. Any changes in these factors can impact your credit score positively or negatively, causing it to fluctuate. Therefore, it is true that your credit score is always changing.

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Current Version
Mar 20, 2023

Quiz Edited by
ProProfs Editorial Team
Apr 26, 2013

Quiz Created by
Greenpath

Credit Score Basics Pre-quiz

Which is the most important factor in determining a credit score?

The secret to cleaning up a poor credit score is by

Your credit score can affect your auto insurance rates.

The highest FICO credit score is

Your credit score is always changing.