FiCEP Credit Reports and Scoring 2

Question 1

Which factor has the greatest impact on a FICO credit score?

Accepted Answer

Payment history

Answer

Payment history accounts for approximately 35% of a FICO score, making it the most influential factor.

Question 2

A client has a credit utilization ratio of 78%. What does this indicate?

Accepted Answer

They are using too much available credit; target is below 30%

Answer

A 78% utilization ratio is considered high. The recommended target is below 30%, with below 10% being ideal.

Question 3

How long does a Chapter 7 bankruptcy remain on a credit report?

Accepted Answer

10 years

Answer

A Chapter 7 bankruptcy stays on credit reports for 10 years from the filing date.

Question 4

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

Accepted Answer

Hard inquiries occur when applying for credit and can lower scores; soft inquiries do not affect scores

Answer

Hard inquiries result from credit applications and may lower scores by a few points; soft inquiries do not affect scores.

Question 5

A client finds an unfamiliar account on their credit report. What should the counselor recommend?

Accepted Answer

File a dispute with all three bureaus, place a fraud alert, and consider a credit freeze

Answer

Unknown accounts may indicate identity theft and require disputes, fraud alerts, and potentially a credit freeze.

FiCEP - Financial Counseling Certification Program Practice Test