FiCEP Credit Reports and Scoring 4 — Questions and Answers
Question 1: A client notices a collection account on their credit report that was paid in full two years ago but still shows as 'unpaid.' What is the best course of action?
- Dispute the inaccuracy with the credit bureau in writing (Correct answer)
- Wait for the account to fall off after 7 years
- Ask the creditor to delete the entire account
- Open a new credit account to offset the negative item
Correct answer: Dispute the inaccuracy with the credit bureau in writing
Under the FCRA, consumers have the right to dispute inaccurate information with credit bureaus, which must investigate within 30 days.
Question 2: Which FICO score range is generally considered 'good' credit by most lenders?
- 580–669
- 670–739 (Correct answer)
- 740–799
- 800–850
Correct answer: 670–739
FICO scores of 670–739 are classified as 'good,' while 740–799 is 'very good' and 800+ is 'exceptional.'
Question 3: A client's credit report shows a charged-off account. How long can this negative item typically remain on a credit report?
- 3 years from the date of charge-off
- 7 years from the date of first delinquency (Correct answer)
- 10 years from the date of charge-off
- Indefinitely until the debt is paid
Correct answer: 7 years from the date of first delinquency
Most negative items, including charge-offs, can remain on a credit report for 7 years from the date of first delinquency leading to the charge-off.
Question 4: Under the VantageScore 3.0 model, which factor carries the MOST weight in calculating the score?
- Age of credit history
- Total credit utilization and balances
- Payment history (Correct answer)
- Recent credit inquiries
Correct answer: Payment history
In VantageScore 3.0, payment history is the most influential factor, classified as 'extremely influential.'
Question 5: A client applies for a mortgage and the lender pulls all three credit bureau scores. Which score is typically used for underwriting decisions?
- The highest of the three scores
- The average of all three scores
- The middle score among the three bureaus (Correct answer)
- The score from Equifax only
Correct answer: The middle score among the three bureaus
Mortgage lenders typically use the middle score from the three major credit bureaus (Experian, Equifax, TransUnion) for underwriting decisions.
Question 6: Which type of credit inquiry does NOT affect a consumer's FICO credit score?
- Applying for a new credit card
- A lender checking credit for a pre-approval offer (Correct answer)
- Applying for an auto loan
- Applying for a personal loan
Correct answer: A lender checking credit for a pre-approval offer
Soft inquiries, such as pre-approval checks or account reviews by existing creditors, do not affect credit scores; only hard inquiries do.
Question 7: A client has a credit card with a $5,000 limit and carries a $4,200 balance. What is their credit utilization ratio on this card?
- 42%
- 58%
- 84% (Correct answer)
- 16%
Correct answer: 84%
Credit utilization is calculated by dividing the balance ($4,200) by the credit limit ($5,000), which equals 84%.
FiCEP Credit Reports and Scoring 4
A client notices a collection account on their credit report that was paid in full two years ago but still shows as 'unpaid.' What is the best course of action?