Credit and Debt Management Flashcards

A client's credit report shows a collection account for $1,200 that is four years old. What should the counselor advise regarding the statute of limitations?

Answer: Verify the statute of limitations in the client's state before taking any action

The statute of limitations varies by state and debt type, and making a payment can restart the clock, so verification is essential before advising action.

Which credit scoring factor has the greatest weight in the FICO scoring model?

Answer: Payment history

Payment history accounts for approximately 35% of a FICO score, making it the single most influential factor.

A client wants to dispute an inaccurate item on their credit report. Under the Fair Credit Reporting Act, the credit bureau must investigate within how many days?

Answer: 30 days

The FCRA requires credit reporting agencies to investigate disputes within 30 days of receiving the consumer's complaint.

What is the recommended credit utilization ratio to maximize a client's credit score?

Answer: Below 10%

While keeping utilization below 30% is the widely known guideline, consumers with the highest credit scores typically maintain utilization below 10%.

A client is considering enrolling in a debt management plan through a credit counseling agency. Which of the following is a typical feature of these plans?

Answer: Creditors may agree to reduced interest rates and waived fees

Debt management plans typically involve creditors agreeing to reduced interest rates, waived late fees, and possibly re-aging accounts, but require full repayment of principal.

Which federal law protects consumers from abusive debt collection practices, including limits on when and how collectors can contact them?

Answer: Fair Debt Collection Practices Act

The FDCPA protects consumers from abusive, deceptive, and unfair debt collection practices by third-party collectors.