Do you have a clear picture of what impacts your credit profile and, more importantly, what steps you can take to help improve it.?
According to credit experts, 42% of U.S. consumers have credit scores between 550 and 699. As a result, these consumers typically don’t qualify for preferred interest rates and, depending on their overall credit profile, they may not even qualify for certain loans and credit cards.
Credit scores can wreak havoc on securing a favorable mortgage. I find this short quiz, from credit consultants ApprovalGuard.com, to be immensely helpful when it comes to understanding how your credit profile works. Take a few minutes to see if your credit knowledge is up to par.
1. To have the best credit-profile impact, what is the maximum amount of your monthly credit line that should be used?
a) 70%
b) 30%
c) 50%
2. What is the number-one contributing factor to a good credit score?
a) Length of credit history
b) Amounts you owe
c) Payment history
3. If you pay 2% each month on your credit card (typical minimum payment), when will you pay off a $3,000 balance at 10% interest?
a) 18 years
b) 6 years
c) 3 years
4. After paying off a high-interest credit card, you should:
a) Continue using it occasionally
b) Close the account
c) Use the full amount of available credit every month
5. Applying for credit cards in order to just receive a free sign-up gift (t-shirts, mugs, etc.) has no impact on my credit profile?
True or False
6. Rewards points on credit cards are a good deal when:
a) I get cash back
b) I get free airline tickets
c) I carry no balance each month
7. To have a credit score, I must have at least one creditor reporting activity on my credit report for:
a) 12 months
b) 8 months
c) 6 months
8. Credit bureaus that manage your personal credit report data and credit scores are a:
a) Government entity
b) Non-profit agency
c) Regular business corporation
9. Banks and credit card companies think you are creditworthy by how many credit offers you receive by mail?
True or False
10. Credit scores are used by lenders mainly to:
a) Tell how I compare to other consumers
b) Tell if I make my payments on time
c) Predict the likeliness that I will repay my loan on time
Answers: 1 – c, 2 – c, 3 – a, 4 – a, 5 – False, 6 – c, 7 – c, 8 – c, 9 – False, 10 – c
If you find you answered more than half of these questions wrong, you’re not alone, says ApprovalGuard, whose surveys reveal that the majority of consumers do not know the answers to these and similar types of questions. The good news is it’s not too late. With a good understanding and proper guidance of how credit works, you can learn how to effectively manage your personal credit profile.
For more information, continue the conversation with Pat Neville, and please feel free to forward this quiz to others.