Introducing the Credit Card: Answer Guide

Exercise 3: How can I build good credit?

  • 1. Which of the following probably has the highest credit score? Assume that all of them have made regular monthly payments on time.
    1. An 18 year old college freshman
    2. A 20 year old waitress with two active credit cards
    3. Answer: A 40 year old business owner with two cars, a house, and four active credit cards
    4. A 50 year old with five credit cards who rents his house.
  • Explanation: The 18 year old probably has no credit yet, and the 20 year old will have very little from just two credit cards. The 50 year old would be closer to the 40 year old, but the fact that he rents his house reduces his chances of having a high score.
  • 2. What makes a person a good cosigner?
    1. A high credit score
    2. A steady income
    3. The ability to pay for your loan if you can’t
    4. Answer: All of the above

Exercise 4: Why do some people have bad credit?

  • 1. Which person probably has the lowest credit score?
    1. A woman who has missed three credit card payments in a row
    2. Answer: A man who has had three car repossessions
    3. A woman who has a $125,000 house loan
  • Explanation: While Person A and Person B both have bad credit histories, the cars from Person B’s scenario count as more points against his credit. The value of the loan for Person C’s report will not matter, assuming she has made her payments on time.
  • 2. Which of these people has a bad credit score? Assume they are all making their payments on time.
    1. A woman who owes money for a house, car, and loan
    2. A man with five credit cards
    3. A college freshman with $15,000 in student loans
    4. Answer: None of the above.
  • Explanation: This is a trick question. If all of the people have made their payments on time, they should not have bad credit scores. This refers to this statement, right above the bullet list on page 9: “You can be in a lot of debt and still have a good credit score if you are making all of your payments on time.”