PCS Credit Risk Assessment & Analysis 2

Question 1

A debtor's debt-to-income (DTI) ratio is 55%. How does this affect the collector's risk assessment?

Accepted Answer

It signals high financial stress, reducing the probability of voluntary repayment

Answer

A DTI above 43-50% indicates the debtor is overextended, making voluntary repayment less likely without a structured arrangement.

Question 2

Which credit bureau score model is most commonly used by lenders to assess consumer creditworthiness in the United States?

Accepted Answer

FICO Score

Answer

The FICO Score, developed by Fair Isaac Corporation, is the most widely used credit scoring model by U.S. lenders.

Question 3

When performing a skip trace to locate a debtor, which source is considered most reliable for current address information?

Accepted Answer

Credit bureau header data

Answer

Credit bureau header data is updated frequently by lenders and creditors, making it one of the most reliable sources for current debtor addresses.

Question 4

A collector reviews a charged-off account and notices the debtor has opened three new credit cards in the past six months. What does this suggest?

Accepted Answer

The debtor may have access to credit resources and could potentially satisfy the debt

Answer

New credit account openings suggest the debtor has been approved for credit, indicating lenders see them as capable of repayment, which may mean collection is more viable.

Question 5

What is the primary purpose of a credit risk scorecard in the collections process?

Accepted Answer

To rank debtors by likelihood of payment to prioritize collection efforts

Answer

Credit risk scorecards help collectors prioritize accounts by scoring the probability of payment, enabling efficient allocation of collection resources.

(PCS) Professional Collection Specialist Practice Test

(PCS) Professional Collection Specialist Practice Test

PCS Credit Risk Assessment & Analysis 2