FiCEP Credit Reports and Scoring 5 — Questions and Answers
Question 1: A client wants to build credit from scratch. Which option is MOST appropriate for someone with no credit history?
- Apply for an unsecured personal loan
- Open a secured credit card (Correct answer)
- Co-sign a friend's auto loan
- Request a credit limit increase on an existing card
Correct answer: Open a secured credit card
A secured credit card requires a cash deposit as collateral, making it accessible for people with no credit history while helping build a positive payment record.
Question 2: Which federal law gives consumers the right to obtain one free credit report from each bureau annually?
- Fair Debt Collection Practices Act (FDCPA)
- Equal Credit Opportunity Act (ECOA)
- Fair and Accurate Credit Transactions Act (FACTA) (Correct answer)
- Truth in Lending Act (TILA)
Correct answer: Fair and Accurate Credit Transactions Act (FACTA)
FACTA amended the FCRA to require the three major credit bureaus to provide consumers one free credit report per year via AnnualCreditReport.com.
Question 3: A client is 60 days past due on a credit card. How will this likely affect their FICO score compared to a 30-day late payment?
- The impact is the same regardless of how many days late
- A 60-day late payment has a significantly greater negative impact (Correct answer)
- A 30-day late payment has more impact because it is more recent
- Late payments only affect the score after 90 days
Correct answer: A 60-day late payment has a significantly greater negative impact
The severity of late payment derogatory marks increases with the number of days past due; a 60-day late is more damaging than a 30-day late.
Question 4: What is the primary difference between a credit report and a credit score?
- A credit score is provided by the government; a credit report is from lenders
- A credit report is a detailed history of credit activity; a credit score is a numerical summary derived from that data (Correct answer)
- A credit report shows only negative items; a credit score shows only positive items
- They are the same thing presented in different formats
Correct answer: A credit report is a detailed history of credit activity; a credit score is a numerical summary derived from that data
A credit report is a detailed record of a consumer's credit history, while a credit score is a three-digit number calculated using data from the credit report.
Question 5: A client with multiple unpaid medical collections learns that FICO Score 9 treats medical debt differently. What is the key difference?
- Medical collections are completely excluded from all FICO models
- FICO Score 9 ignores paid medical collections and gives less weight to unpaid ones (Correct answer)
- Medical debt is weighted more heavily in FICO Score 9
- FICO Score 9 extends the reporting period for medical debt to 10 years
Correct answer: FICO Score 9 ignores paid medical collections and gives less weight to unpaid ones
FICO Score 9 ignores paid medical collection accounts and gives less weight to unpaid medical collections compared to other types of unpaid collections.
Question 6: A financial counselor advises a client to 'piggyback' on a family member's credit card. What credit-building technique does this describe?
- Becoming a joint account holder on the card
- Being added as an authorized user on an established account (Correct answer)
- Taking out a co-signed loan with the family member
- Transferring the family member's credit balance to the client
Correct answer: Being added as an authorized user on an established account
Being added as an authorized user allows the positive payment history and credit limit of the primary cardholder's account to appear on the authorized user's credit report.
Question 7: Under the FCRA, how long does a credit bureau have to investigate a consumer's dispute after it is received?
- 15 days
- 30 days (Correct answer)
- 45 days
- 60 days
Correct answer: 30 days
The FCRA requires credit bureaus to complete their investigation of a dispute generally within 30 days (extendable to 45 days if the consumer submits additional information).
FiCEP Credit Reports and Scoring 5
A client wants to build credit from scratch.
Which option is MOST appropriate for someone with no credit history?