What Do You Know About Credit and Debt

I owe, I owe, so off to work I go! Everyone wants to be debt-free, but only a small percentage of us ever achieve that coveted status. According to the Experian credit reporting agency, Americans owe $13.3 trillion. Of that, $4.1 trillion is credit card debt. Discover Card breaks it down even further saying it averages $132,529 per U.S. household.

So, how much do you know about credit and debt? Our friends at AARP created this short quiz to test your knowledge.

  1.  According to credit agency Experian, which of these is among the five biggest factors in determining your credit score?
  • Your payment history
  • Credit utilization
  • Negative information such as late payments
  • All of the above

Answer:  All of the above

Rounding out the top five are your credit mix (the different types of credit you have available) and “hard” credit inquiries, in which a potential lender makes an inquiry as part of their decision-making process.

  • As long as you make the minimum payment on your credit cards, you won’t hurt your credit score.
  • True
  • False

Answer:  False

Paying off just the minimum can hurt your credit utilization ratio (how much credit you have available), and that in turn can affect your score, Experian notes.

  • True or False? Your credit score can affect your home and auto insurance rates.
  • True
  • False

Answer:  True

Some insurers check your credit when setting their rates, using it to help create and “insurance score.” The practice is banned in some states.

  • What is APR?
  • Adjusted Personal Return
  • Annual Percentage Rate
  • Adjudicated Professional Ranking
  • Approved Power Rating

Answer:  Annual Percentage Rate

The APR measures the cost a lender charges you for funds per year.

  • According to a 2019 survey from Bankrate, this percentage of Americans has savings to pay an unexpected $1,000 expense.
  • 20 percent
  • 30 percent
  • 40 percent
  • 50 percent

Answer:  40 percent

More than a third would need to borrow the money outright, the personal finance site reported.

  • This type of credit card requires a cash security deposit, which then is used to set your credit line.
  • Professional card
  • Affinity card
  • Debit card
  • Secured card

Answer:  Secured card

The cards provide a method for people to establish or reestablish their credit worthiness.

  • Who has a credit report?
  • Everyone
  • Everyone with a credit account
  • Everyone over 21 years of age
  • Everyone with a Social Security number

Answer:  Everyone with a credit account

Experian notes that a report isn’t created until an individual opens a credit account.

  • What is the lowest possible FICO credit score?
  • 0
  • 100
  • 300
  • 500

Answer:  300

The scale ranges from 300 to 850, FICO says. Understanding credit and debt are extremely important, especially when doing financial planning and retirement planning. To find out more about handling your credit, check

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