Institute of Consumer
Financial Education
Institute of Consumer
Financial Education

Young Person's Credit Risk Profile

Are You Seeking Credit or Charge Cards?
Will You Be A Good Credit Risk?

Written by Paul Richard - ICFEs Executive Director

Are you considering signing a credit card application? Before you do, especially if it is your first credit card you are applying for, answer the questions below to determine your credit risk profile. With money or credit comes decision making responsibilities. These true or false questions will help you understand how well you (might) manage credit-based spending and also provide some insight on why you want to obtain credit. Mark your answers true or false. Scoring is on the next page.

1. ____ Having a credit card (will give me) gives me a sense of security.
2. ____ I (will be buying) purchase more from retailers who extend credit
3. ____ I often pay for eating out or purchase gifts to impress others.
4. ____ Credit cards (will) help me improv e my life-style.
5. ____ Having credit (will) allow me to buy major items I want now.
6. ____ I often argue with myself or others about over-spending.
7. ____ My savings balance is negatively affected by credit-based spending.
8. ____ I often have trouble recounting money I have spent during the day.
9. ____ Others I know overspend, and it doesn't seem to hurt them financially.
10. ____ My closet is full of things I have only have worn once or twice.
11. ____ Many things I have purchased I wish I hadn't when I get home.
12. ____ I'm often a bit late with some payments, but it doesn't matter much.
13. ____ I have borrowed money from relatives and friends I haven't
14. ____ I make impulse purchases at the last minute to make me feel better.
15. ____ I charge things (meals, gas, etc.) that are gone when the bill arrives.

Credit Risk Profile Scoring
None True_ A true credit-worthy person, you are, (or should be ) spending wisely.

1-2 True_ Just barely "OK" observe the caution signs now. If any of the statements were marked "true," developing and strengthening financial self-discipline is more necessary and urgent than obtaining a credit card or an additional credit card or even an expanded line of credit.
For example, if savings and accumulation (question seven) will be (or is) negatively affected by credit-based spending, priorities are out of order. No matter if income is sufficient enough to pay in full the credit card bills when they arrive, if there is no money left over with each paycheck to put into savings and investments, credit is being abused and is most likely fueling over-spending.

3-5 True _ Danger ahead! Suspend all credit based spending now. If more than three questions were marked "true", better put that credit card application on hold. Next, look for ways to improve spending practices such as comparison shopping techniques and increase savings through better spending.
If you presently are holding more than one credit card with an out-standing balance, put them on ice* or cut them up AND return them to the issuer.** Don't apply for more credit or make any credit based purchases until all outstanding balances are paid in full.

5-10 True_ You are close to becoming a "debt-head," avoid credit all together.
If more than five questions were marked "true", this isn't the time for you to be considering any sort of credit-based spending. If some sort of card is needed for convenience or business travel, as an example, consider a debit card.

11-15 True _ Confirmed plastic spending addict. Financial melt-down ahead.
* Put your credit cards in a glass of water in the freezer. "If you have to go home and defrost your credit before you charge something, you have time to decide whether the purchase is a wise one."
** Credit Cards belong to the Issuer. If cut-up and simply discarded, the Issuer doesn't know you are closing the account and it will show a zero balance and available credit. this could preclude you from getting credit when you have a legitimate need.