What’s Your Debt IQ? Take This Quiz to Find Out

If you're like most Americans, you are thousands of dollars in debt. But do you really understand how the credit system works?

Americans seem to be experts in debt — racking it up, that is. U.S. households owed $12.25 trillion in early 2016 — an amount that hovers near a post-World War II high as a percentage of GDP — as mortgage levels crept up, car loans increased and student loan debt ballooned.

With all that money due to creditors, we wondered how well Americans actually understand debt and credit. What do you know? Here’s a quick quiz to find out — and some resources to help you fill in the gaps in your knowledge:

Co-signing a loan

Question: You want to help your son get a car, so you co-sign on the loan. Now, he’s stopped paying. That’s his problem, right?

Actually, it’s your problem, too.

Co-signing on a loan is the same as taking out the loan yourself. If your son, or whomever you were trying to help, stops paying, it can do a real number on your credit score. Even worse, a creditor can come after you for payment, and you could find yourself on the receiving end of collection calls or, worse, a garnishment order.

For more information, read “3 Reasons You Shouldn’t Co-Sign a Loan” — which includes pointers on how to protect yourself if you do — and “How to Get Out From Under a Co-Signed Loan.” (Hint: It isn’t easy).

Marrying into bad credit

Question: Mr. Right has the wrong credit score. If you marry him, your credit score will take a nose dive, too. True or false?


Married couples share many things, but a credit score is not one of them. His bad credit will not affect your score, just as your good credit won’t pull his up.

However, just because marriage won’t affect your credit score doesn’t mean it won’t affect your creditworthiness. Joint account applications will look at both spouses’ scores, and that could mean less favorable loan terms if one spouse has a poor credit history.

Here’s what FICO, that’s the company calculating the most commonly used credit scores, has to say on the subject:

Most mortgage lenders will check both of your FICO scores when evaluating your loan application. Even if your wife’s good score would qualify her for a loan with a good interest rate, your bad score may mean that, as a couple, you would only qualify for a loan at a worse interest rate. If your score is very bad, you may not qualify at all.

Check out “6 Common Myths Regarding Marriage and Credit” for more on the subject. And while you’re thinking about matrimony, read “What Will Marriage Do to Your Finances?

Student loan debt

True or false: Student loan debt is like a phoenix. It can’t be killed, even in bankruptcy.

In many cases, this is true. Student loan debt is much harder to shed than other types of debt.

But that doesn’t mean it’s impossible. According to U.S. News & World Report, the biggest obstacle to having student debt discharged in bankruptcy may be the belief that student debt cannot be discharged in bankruptcy.

U.S. News said a study found that only 0.1 percent of those with student loans who filed for bankruptcy attempted to have their student loans discharged. Of those who did include them, 40 percent saw their debt discharged or at least reduced.

As MoneyTalksNews founder Stacy Johnson writes:

While it’s certainly not as easy to eliminate student loan debt through bankruptcy as other types of debt, it does happen. The key is proving “undue hardship.”

Read the full article for more detail on shedding student loan debt through bankruptcy and other student loan forgiveness options.

Shedding old debts

Can you get away from your old debts if you wait for the statute of limitations to expire?

Not entirely.

The statute of limitations is the amount of time in which a collector can sue you for repayment. However, the statute of limitations doesn’t eliminate the debt. It just takes away the option for creditors to take you to court. Collectors can still call and send you daily letters reminding you of your need to repay.

Under the Fair Debt Collection Practices Act, you could contact a collector and ask them to stop contacting you. But you need to be careful because, in some states, contacting a collector may reset the statute of limitations and pave the way for them to sue you.

The Federal Trade Commission website notes that the rules vary by state and type of debt:

For example, the statute of limitations for credit card debt in a few states may be as long as 10 years, but most states impose a period of three to six years.

To get an idea of the laws on old debts in your state, check out the chart provided by Credit Infocenter.

How did you do this round? Share your score in the comments below or on our Facebook page.

Maryalene LaPonsie
Maryalene LaPonsie
After 13 years as a staffer for a Michigan legislator, I decided it was time to quit the commute and work from home instead. For the past three years, I’ve been penning ... More


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