J Money over at the great personal finance blog, Budgets Are Sexy, recently shared a great credit score and credit report quiz with his readers, and I just had to share it with you. Find out how you score on this credit quiz…
1) What is the average American’s credit card debt?
2) Many consumers can save _____ in a lifetime through better credit management.
- $1 million
3) True or False. Debt to income ratio has no impact on a credit score.
4) What factor weighs most on your credit score?
- Length of credit history
- Credit utilization
- Total accounts
- On-time payment History
5) Closing your oldest account may reduce your credit score because it effects:
- Credit Utilization
- Length of credit history
- On-time payment history
- All the above
6) True or False: Using your credit cards regularly is better than not using them at all.
7) You can improve your credit score by
- Closing credit cards you don’t use
- Not using your credit cards
- Reviewing your credit report regularly and correcting any errors
- Not paying your bills on time
8 ) Do credit inquiries impact your credit score?
- It depends
9) In today’s economy, good credit is essential when:
- Trying to secure a home loan
- Applying for a job
- Applying to rent an apartment
- All of the above
10) True or False. A great credit score is considered anything above 690.
Quiz Answers: (No Cheating!)
1) C. $8000. The average American consumer has $8,000 in credit card debt.
2) B. $1 million – A good credit score qualifies you for better interest rates on home loans, car loans and student loans. Over the course of a lifetime, these interest fees can really add up to a lot of money.
3) True. Length of credit history, credit utilization, total accounts, on-time payment history and credit inquiries are the only components of a credit score.
4) D. On-Time payment history. On average, a person with perfect on-time payment history has a credit score over 700. However, make just one late payment and your credit score can drop 50 points.
5) D. All of the above – Credit utilization, length of credit history and on-time payment history are all important components of a credit score.
6) True – Credit card utilization is defined as the total credit card debt you have divided by the total available credit on your credit cards. High credit card utilization can be a warning sign of credit risk.
7) C. Credit reports are rich with data and often have an error or two. If you contact credit reporting agencies and have incorrect information removed, you may improve your score.
8 ) C. It depends. Hard inquiries pulled by lenders do have an impact on your credit score, but soft inquiries don’t. When you pull your credit score simply for information purposes through your written authorization, it is considered a soft inquiry and has no impact on your actual credit score.
9) D. All of the above. Employers and renters are more apt to check your credit file before offering you a job or a place to live.
10) False. That used to be true prior to the recession. Currently, the average American has a credit score that comes in right around 690, but, even a 690 credit score provides no guarantees when it comes to getting a loan.
Analysis: (How did you do?)
If you missed 0-2 questions, you know credit. You understand the important of using credit wisely and likely have a high credit score.
If you missed 3-4 questions, you’re doing ok. You likely have an average credit score and understand the importance of paying bills on time.
If you missed more than 5 questions, chances are your credit is in need of improvement and you should start taking steps towards responsible credit use.