It’s April which means it’s Financial Literacy Month! We know these are difficult times which is why it’s more important than ever to be informed and aware when it comes to your finances. #RealMoneyTalk, it’s okay not to know everything as long as you make an effort to be open and keep learning. Oftentimes, it can be easier to start with what you don’t know to figure out what to focus on – in this case, which money topics you can brush up on? We’ve put together a quiz to test how much you know about personal finance and all things credit. There are 10 questions — are you up for the challenge?
1) What does APR stand for?
- Annuity Per Rate
- Annual Price Rate
- Annual Percentage Rate
- Applied Percentage Rate
2) What is an ideal credit utilization ratio?
3) What is considered an “exceptional” credit score?
4) Which one of these does NOT affect your credit score?
- Payment history
- Amount owed
- Type of credit accounts
- Your Income
5) What is the only way to avoid paying interest on a credit card?
- Not making new purchases if you have a balance
- Paying minimum payment each month on time
- Paying off the balance in full each month on time
- Keeping your credit utilization ratio under 50%
6) Someone with good credit co-signs your loan, the interest rate you are charged on the loan:
- Stays the same
7) As your credit score increases, the interest rate you are charged on a loan:
- Stays the same
8) How much should you have saved in an emergency fund?
- 1 year
- 3-6 months
- 1 month
9) A grace period is a period of time during which you can:
- Not pay your bills
- Pay your credit card bill without having to pay interest
- Pray before a meal
10) Personal question time: When you are worried about your finances or your financial health, you:
- Hide and never check your account
- Pretend debt doesn’t exist
- Learn everything you can to improve your finances
Ready to see how many you got right? Here are the correct answers:
1) C – APR stands for Annual Percentage Rate and represents the rate of interest you’ll pay when you take out a loan. Essentially, it helps you understand how expensive it will be to take out a certain loan by factoring in costs like closing costs, mortgage insurance etc.
2) B – Under 30% is an ideal credit utilization ratio aka the ratio of your credit card balance to your available credit limits. A higher credit utilization ratio suggests that your balances are high.
If your balances are high, there’s a greater likelihood that you’ll be unable to repay your debt.
3) D – 800. When you’re working with the FICO score range, a rating above 670 is considered to be a good credit score, while a credit score above 800 is considered to be exceptional.
4) D – Your income or job doesn’t affect your credit score. There are six factors that affect your credit score including payment history, types of credit lines and total balances and debt.
5) C – Paying off your balance in full each month within the grace period (before the payment due date) ensures that you avoid paying interest.
6) A – Decreases; If someone cosigns your loan, they undertake the responsibility to pay the lender if you are unable to or do not pay on the loan. This reduces the risk of default for the lender. Therefore, generally if someone cosigns your loan, your interest rate decreases.
7) A – Decreases; People with high credit scores generally can borrow money at lower interest rates than people with low credit scores because people with high credit scores have demonstrated responsible use of credit and are seen by lenders as less risky.
8) B – You should have at least three months of living expenses in your emergency fund, but six months is ideal.
9) B – A grace period allows you to pay your credit card bill without having to pay interest.
10) C – It is Financial Literacy Month so we had to end with a reminder to try and learn everything you can about ways to improve your finances!
We know it can be scary and overwhelming sometimes to confront your financial situation but there are lots of resources to help you break down these financial concepts and support you in your journey to achieve financial freedom. If you’re unsure where to start, you can check out Turbo to learn more about any of these financial topics including improving your credit score, managing debt and becoming more comfortable having the #RealMoneyTalk about your finances.
We hope you learned something new about personal finance from this quiz and feel empowered to keep learning. After all, we’re all figuring this out together so don’t be shy to ask questions and talk to others. Don’t forget to share your score out of 10 in the comments below!