AFC - Accredited Financial Counselor Accredited Financial Counselor Credit and Debt Management 1

Question 1

A client has a credit score of 580 and is being denied credit. Which of the following actions would most directly improve their credit utilization ratio?

Accepted Answer

Paying down outstanding revolving balances below 30% of credit limits

Answer

Closing unused credit card accounts to simplify their finances

Answer

Applying for a new installment loan to diversify credit mix

Answer

Disputing all negative items on the credit report regardless of accuracy

Question 2

Under the Fair Debt Collection Practices Act (FDCPA), which of the following is a debt collector PROHIBITED from doing?

Accepted Answer

Calling a debtor repeatedly with the intent to annoy or harass

Answer

Contacting a debtor by mail to request payment

Answer

Calling a debtor at their workplace if the employer permits it

Answer

Reporting an accurate delinquent debt to a credit bureau

Question 3

A client wants to use the debt avalanche method to eliminate four debts. Which debt should they prioritize paying off first?

Accepted Answer

The debt with the highest interest rate

Answer

The debt with the smallest outstanding balance

Answer

The debt with the largest outstanding balance

Answer

The debt with the most recent delinquency date

Question 4

A counselor is reviewing a client's credit report and finds a collection account that is six years old. The client lives in a state with a four-year statute of limitations on open accounts. Which statement is most accurate?

Accepted Answer

The debt is time-barred from legal collection but may still appear on the credit report for up to seven years

Answer

The collector can still sue the client because the credit report entry has not yet expired

Answer

The client should immediately pay the debt in full to restart the statute of limitations clock

Answer

The credit bureau is legally required to remove the collection account because the statute of limitations has passed

Question 5

Which of the following best describes a secured credit card and its primary benefit for a client rebuilding credit?

Accepted Answer

A card where the credit limit is collateralized by the cardholder's own cash deposit

Answer

A card with a zero-interest introductory period backed by a creditworthy co-signer

Answer

A card issued exclusively to consumers with credit scores above 700

Answer

A card that automatically converts to a rewards card after six on-time payments

Question 6

A client with $30,000 in unsecured debt is considering a debt management plan (DMP) through a nonprofit credit counseling agency. Which outcome should the counselor explain is a likely benefit of a DMP?

Accepted Answer

Creditors may agree to reduce interest rates and waive certain fees

Answer

All negative credit report entries will be removed upon enrollment

Answer

The client will no longer be required to make monthly payments during the plan

Answer

The debt will be legally discharged at the conclusion of the plan