AFC - Accredited Financial Counselor Credit and Debt Management Questions and Answers

Question 1

A client, Sarah, is working to improve her FICO credit score. Which of the following factors carries the most weight in the FICO score calculation?

Accepted Answer

Payment history

Answer

Amounts owed

Answer

Length of credit history

Answer

New credit

Question 2

An AFC is counseling a client who is overwhelmed with various debts. The client has a stable income and wants to pay off their debt systematically. The counselor suggests the 'debt snowball' method. Which of the following best describes this strategy?

Accepted Answer

Paying off the smallest debt balance first for a quick psychological win, then rolling that payment into the next smallest debt.

Answer

Paying off the loan with the highest interest rate first, while making minimum payments on others.

Answer

Consolidating all debts into a single loan with a lower interest rate.

Answer

Making extra payments on the largest debt balance first to feel a significant impact.

Question 3

Under the Fair Debt Collection Practices Act (FDCPA), which of the following actions by a third-party debt collector is permissible?

Accepted Answer

Calling the debtor's neighbor to ask for the debtor's address.

Answer

Calling the debtor's employer and disclosing the nature of the debt.

Answer

Contacting the debtor at 10:00 PM local time.

Answer

Threatening to have the debtor arrested for non-payment of a civil debt.

Question 4

A client pulls their credit reports from all three major credit bureaus (Equifax, Experian, and TransUnion) and notices an error on the Experian report. What is the first step the client should take to dispute this inaccuracy?

Accepted Answer

File a dispute directly with the credit bureau (Experian) that is showing the error.

Answer

File a lawsuit against the creditor that reported the inaccurate information.

Answer

Contact the Federal Trade Commission (FTC) to file a formal complaint.

Answer

Send a dispute letter via certified mail to the creditor that provided the information.

Question 5

A financial counselor is calculating a client's back-end debt-to-income (DTI) ratio. The client has a gross monthly income of $5,000. Their monthly obligations include a $1,200 mortgage payment, a $400 car loan payment, a $150 student loan payment, and a $100 minimum credit card payment. What is the client's back-end DTI ratio?

Accepted Answer

37%

Answer

30%

Answer

24%

Answer

42%

Question 6

Which type of bankruptcy, also known as a 'wage earner's plan,' involves creating a repayment plan over three to five years to pay back all or a portion of the debts?

Accepted Answer

Chapter 13

Answer

Chapter 11

Answer

Chapter 7

Answer

Chapter 12