Question
Linda is a student at Alabama University and does not have any loans. She is just now learning about credit scores and has recently found
Linda is a student at Alabama University and does not have any loans. She is just now learning about credit scores and has recently found out that lenders commonly assess the credit payment history provided by one or more credit bureaus when deciding whether to extend a credit card, personal loan or mortgage. For Linda to establish her creditworthiness, she needs to build credit with the credit rating agencies for a credit score. Which statement is incorrect?
a) Linda is looking to order a credit card to establish a positive credit history by using credit.
b) Linda's credit score can affect the interest rate quoted on the loan that she will be seeking.
c) A high credit score could increase Linda's interest rate substantially, which may translate into savings of thousands of dollars in interest expense over time.
d) Linda was thinking of opening a lot of new accounts in a short period of time however lenders might assess this as riskier than those with long histories and fewer accounts.
e) Linda believes it is better to have a higher credit limit and use less of it each month rather than using a lot of the available credit as lenders see this as a greater risk. This is true even if you pay your balance in full by the due date. For example:
· a credit card with a $5,000 limit and an average borrowing amount of $1,000 equals a credit usage rate of 20%
· a credit card with a $1,000 limit and an average borrowing amount of $500 equals a credit usage rate of 50%
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