CFC Debt Management and Credit Planning 2

Question 1

What is the primary purpose of a debt management plan (DMP) administered by a nonprofit credit counseling agency?

Accepted Answer

To negotiate reduced interest rates and consolidate payments to creditors

Answer

To eliminate debt through bankruptcy discharge

Answer

To purchase debt at a discount and resell it

Answer

To increase the client's credit score immediately

Question 2

Which factor carries the highest weight in calculating a FICO credit score?

Accepted Answer

Payment history

Answer

Credit utilization ratio

Answer

Length of credit history

Answer

New credit inquiries

Question 3

A financial consultant is helping a client choose between a home equity loan and a home equity line of credit (HELOC). Which statement best describes the key difference?

Accepted Answer

A home equity loan provides a lump sum at a fixed rate; a HELOC is revolving with a variable rate

Answer

A HELOC provides a lump sum at a fixed rate; a home equity loan is revolving with variable rate

Answer

Both products are identical in structure but differ only in tax treatment

Answer

A HELOC must be repaid within 5 years; a home equity loan has no term limit

Question 4

Which of the following is considered a 'secured' form of debt?

Accepted Answer

Auto loan

Answer

Credit card balance

Answer

Medical bill

Answer

Personal line of credit

Question 5

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

Accepted Answer

Calling a debtor before 8 a.m. or after 9 p.m. without consent

Answer

Contacting a debtor by mail

Answer

Calling a debtor between 8 a.m. and 9 p.m. local time

Answer

Reporting a delinquency to a credit bureau

Question 6

What is debt consolidation primarily designed to accomplish for a client with multiple consumer debts?

Accepted Answer

Combine multiple debts into a single loan, ideally at a lower overall interest rate

Answer

Eliminate the principal balance owed on all accounts

Answer

Remove negative items from the client's credit report

Answer

Convert unsecured debt into secured debt automatically

Question 7

A client's credit utilization ratio is currently 65%. What is the most effective immediate action to improve their credit score?

Accepted Answer

Pay down existing revolving balances to reduce utilization below 30%

Answer

Apply for a new credit card to increase available credit

Answer

Dispute all negative items on the credit report

Answer

Close unused credit card accounts