Credit and Debt Management Flashcards

A client has three credit cards with utilization of 80%, 25%, and 5%. Their overall utilization is 35%. Which strategy would most improve their credit score?

Answer: Make a large payment on the card at 80% utilization

Reducing the highest individual card utilization addresses both per-card and overall utilization scoring.

Under the FCRA, how long does a Chapter 7 bankruptcy remain on a consumer's credit report?

Answer: 10 years

A Chapter 7 bankruptcy remains on a credit report for 10 years from the filing date, while Chapter 13 remains for 7 years.

A client's credit report shows an authorized user account with a high balance and late payments. What action should the counselor recommend?

Answer: Request removal as an authorized user from the account holder

Requesting removal as an authorized user is the most effective solution, as the account and its negative history will be removed from the client's credit report.

What is the primary difference between a hard inquiry and a soft inquiry on a credit report?

Answer: Hard inquiries occur when a consumer applies for credit and can affect the score, while soft inquiries do not

Hard inquiries result from credit applications and may lower the score by a few points, while soft inquiries do not affect the score.

A client is negotiating a settlement on a charged-off account. What should the counselor advise about obtaining the agreement?

Answer: Get the settlement agreement in writing before making any payment

Written documentation of settlement terms is essential before making any payment to protect the client from future claims for the remaining balance.

Which consumer right under the FCRA allows individuals to receive one free credit report per year from each major credit bureau?

Answer: Annual Credit Report program under FCRA Section 612

FCRA Section 612, implemented through the FACT Act amendments, entitles consumers to one free annual credit report from each bureau through AnnualCreditReport.com.