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

Credit utilization — the ratio of revolving balances to credit limits — accounts for roughly 30% of a FICO score. Reducing balances below 30% of available credit (ideally below 10%) directly lowers utilization and can produce rapid score improvements. Closing accounts actually reduces available credit and can worsen utilization.

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

The FDCPA explicitly prohibits debt collectors from engaging in harassing, oppressive, or abusive conduct, including causing a phone to ring repeatedly or engaging any person in continuous telephone conversations with intent to annoy, abuse, or harass. The other options represent lawful collector activities under the Act.

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 avalanche method directs extra payments toward the debt carrying the highest interest rate first, while maintaining minimums on all others. This approach minimizes total interest paid over time and is mathematically optimal, distinguishing it from the debt snowball method which targets the smallest balance first for psychological momentum.

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 statute of limitations governs how long a creditor can sue to collect a debt, while the credit reporting period (generally seven years from the date of first delinquency) is governed by the FCRA. A time-barred debt cannot result in a successful lawsuit, but it may still legally appear on the credit report until the FCRA reporting window expires.

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 secured credit card requires the applicant to place a refundable cash deposit that typically equals the credit limit. Because the issuer bears minimal default risk, these cards are accessible to consumers with damaged or no credit history. Responsible use — keeping utilization low and paying on time — generates positive payment history that helps rebuild a credit profile.

AFC - Accredited Financial Counselor Practice Test

AFC - Accredited Financial Counselor Practice Test

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