Question

section 2: understanding and using credit

1. multiple choice:

credit can positively impact your financial situation when:
a) it is used irresponsibly and exceeds your income
b) it is used strategically to build a credit score and manage large purchases
c) minimum payments are made without considering interest rates
d) credit cards are used to fund everyday purchases without a repayment plan

1. short answer:

Explanation:

To determine when credit positively impacts finances, we analyze each option:

• Option a: Irresponsible use (exceeding income) leads to debt, negative impact.
• Option b: Strategic use (building credit score, managing large purchases) helps in financial planning (e.g., getting loans with good terms), positive impact.
• Option c: Minimum payments with no interest consideration leads to high interest accumulation, negative impact.
• Option d: Using credit for everyday purchases without a repayment plan leads to debt, negative impact.

Answer:

b) It is used strategically to build a credit score and manage large purchases