FFC Debt and Credit Management 4

Question 1

Which factor does NOT directly affect a FICO credit score?

Accepted Answer

Annual household income

Answer

Income is not a factor in FICO score calculations; scores are based solely on credit-related behaviors reported to bureaus.

Question 2

A client's credit card has a $5,000 limit and a $2,000 balance. What is their credit utilization rate on this card?

Accepted Answer

40%

Answer

Utilization = $2,000 ÷ $5,000 = 40%; experts generally recommend keeping utilization below 30%.

Question 3

What is a 'goodwill letter' in the context of credit management?

Accepted Answer

A letter requesting a creditor remove an accurate late payment as a courtesy

Answer

A goodwill letter is a polite request to a creditor asking them to remove an accurate negative item, often citing an otherwise positive history.

Question 4

Under federal law, how long can a Chapter 7 bankruptcy remain on a consumer's credit report?

Accepted Answer

10 years

Answer

Chapter 7 bankruptcy can remain on a credit report for up to 10 years from the filing date.

Question 5

A client receives a settlement offer from a debt collector for 40% of the original balance. Which consequence should the coach make the client aware of?

Accepted Answer

The forgiven amount may be taxable income reported on a 1099-C

Answer

When $600 or more of debt is forgiven, the IRS requires the creditor to issue a 1099-C, and the forgiven amount may be counted as taxable income.

(FFC) Financial Fitness Coach Certification Practice Test

(FFC) Financial Fitness Coach Certification Practice Test

FFC Debt and Credit Management 4