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Financial Knowledge Assessment: Q3A

3.  From the following list, choose the answer that has the best suggestions for building and maintaining a good credit rating.

  • A.  Have money in savings and protect against identity theft.
  • B.  Keep your debt low and pay your bills on time.
  • C.  Make safe investments and set clear financial goals.
  • D.  Consistently make charges on your credit card and pay them off whenever you get the chance.
  • E.  None of the above.

Explanation:  The correct answer is “B.  Keep your debt low and pay your bills on time.”  The question specifically asks about building and maintaining a good credit rating.  While “A” and “C” are good financial practices generally, they are not ideal courses of action for building and maintaining a credit rating, as doing these things may not necessarily have any effect on your credit rating.  “D” is not correct because paying a credited purchase off “whenever you get the chance,” as opposed to “on time,” is not good financial practice.  For a larger loan, this means paying off the amount due when it’s due, which is typically every month.  For smaller loans, such as a credit card, the statement balance should ideally be paid off, in full, every month in order to avoid the high interest rates typically associated with credit cards.

Continue to Question 4