Debt and Credit Management Flashcards

What is a credit score used for?

Answer: Evaluate creditworthiness

Lenders use it to assess a person's creditworthiness.

Which strategy reduces credit card debt effectively?

Answer: Pay more than the minimum balance

Paying more than the minimum reduces the principal faster.

What is a key component of debt management?

Answer: Develop a structured repayment plan

Creating a repayment plan helps reduce debt systematically.

What happens with late credit payments?

Answer: They lower credit scores and add penalties

Late payments negatively affect credit scores and may incur fees.

Which tool helps track debt and payments?

Answer: Debt payoff calculator

Debt payoff calculators aid in visualizing progress.

How can you improve a poor credit score?

Answer: Make on-time payments consistently

Paying bills on time is a major factor in credit score improvement.

What is a debt-to-income ratio?

Answer: Ratio of debt payments to income

It compares monthly debt payments to gross income.

Why should credit reports be reviewed regularly?

Answer: To catch errors or fraud early

To detect errors and prevent identity theft.

What is credit counseling?

Answer: Guidance on managing and reducing debt

It provides advice and tools to manage debt responsibly.