HUD Exam Prep Latest Updated

% Impact of Account Payment History on Credit Score - ANSWER-35% portion of credit score based on the payment history of accounts, including late payments, delinquencies, judgments, and liens % Impact of Amounts Owed on Accounts on Credit Score - ANSWER-30% portion of score based on the ratio of total credit extended to the amount of credit owed % Impact of Length of Credit History on Credit Score - ANSWER-15% portion of score based don the overall length of credit history in the report, as well as average age of accounts % Impact of Types of Credit Used on Credit Score - ANSWER-10% portion of score based on the variety of accounts % Impact of New Credit on Credit Score - ANSWER-10% portion of score based on the number of recent credit INQUIRIES 1.1.1) All of the following would help a counselor develop a realistic household budget, except: A. Payment information for a paid-off car B. Amount spent on groceries C. Rent payment information D. Monthly cable bill - ANSWER-A 1.1.2) All of the following are reasons why it is important for a client to track income and expenses before finalizing a budget, except: A. It helps show clients that they actually spend less on some expenses than they think. B. It helps identify spending habits. C. It helps show clients that their spending and expenses are out of control. D. It helps define realistic and attainable goals and timelines. - ANSWER-C 1.1.3) Which of the following is a "want" and not a "need"? A. Health care premium B. Car insurance C. Gym membership D. Rent - ANSWER-C 1.1.4) All of the following are effective ways to decrease expenses, except: A. Cancel insurance policy B. Cancel cable service C. Stick to a shopping list D. Conserve energy in the home - ANSWER-A 1.1.5) All of the following are effective strategies to increase income, except: A. Work over time B. Teach yoga C. Find a second job D. Factor in an anticipated raise - ANSWER-D 1.1.6) Rebecca's next appointment is with Ray, a client who recently started a new job and wants to buy a car to cut down on his commute. Rebecca reviews documents that Ray brought to the counseling session and determines that Ray makes about $1,900 each month after taxes. He pays his bills every month and covers his other expenses, but he never has any money left for savings. Identify which information is used in determining a budget, and which information is not. A. Pay Stub B. Bank Statements C. Utility Bills D. Social Security Award Letter E. Annual Bonus F. Stock Dividends G. Employer Reimbursements H. Credit Score - ANSWER-Used to determine budget: A, B, C, D Not used to determine budget: E, F, G, H 1.1.7) Ray's commute on the bus takes over an hour, so he wants to buy a car as soon as possible, but he has poor credit and cannot obtain a loan right now. He thinks he can find a reliable car for about $2,000 and has about 20% of the total in the bank from his tax refund. If Ray's goal is to buy a car within 8 months, what is the minimum amount he needs to save each month? A. $150 B. $175 C. $200 D. $225 - ANSWER-C 1.1.8) Rebecca helps determine that with adjustments Ray can set aside $320 each month to buy the car. How many months will he need to save this amount? A. At least 4 B. At least 5 C. At least 6 D. At least 7 - ANSWER-B 1.2.1) Which section of a credit report will contain employer details? A. Consumer rights B. Account information C. Personal information D. Public records E. Inquiries - ANSWER-C 1.2.2) Which section of a credit report will contain information about a student loan? A. Personal information B. Public records C. Inquiries D. Consumer rights E. Account information - ANSWER-E 1.2.3) Which section of a credit report will contain court information such as bankruptcy? A. Public records B. Inquiries C. Personal information D. Consumer rights E. Account information - ANSWER-A 1.2.4) Which section of a credit report will show recent attempts to open a credit card? A. Personal information B. Public records C. Consumer rights D. Inquiries E. Account information - ANSWER-D 1.2.5) Which section of a credit report will contain information about how to correct inaccuracies? A. Personal information B. Consumer rights C. Public records D. Inquiries E. Account information - ANSWER-B 1.2.6) Indicate which of the following concepts would generate a positive effect on a credit report and which would have a negative effect: A. Paying bills early B. Filing for bankruptcy C. Applying for a new credit card every month D. High credit card balances - ANSWER-Positive Effect on Credit Report A- Negative Effect on Credit Report B-C-D 1.2.9) Place the letters in the correct sequence from the MOST important factor to the LEAST important factor that impacts the determination of a credit score. A. Amount of total credit used B. Number of inquiries on record C. History of delinquent payment D. Length of time accounts have been established - ANSWER-Most Important to Least Important C-A-D-B 1.2.10) Where should a client go to obtain free credit reports? A. B. C. D. - ANSWER-C 1.2.12) Consumers have rights protected by fair credit laws. Indicate which credit regulation corresponds to the scenarios described. You may use an act more than once. 1. Amy sees a charge she did not make on her credit card statement and wants to dispute it. A. Fair Credit Reporting Act (FCRA) B. Fair Credit Billing Act (FCBA) C. Fair and Accurate Credit Transactions Act (FACTA) - ANSWER-B 1.2.12) Consumers have rights protected by fair credit laws. Indicate which credit regulation corresponds to the scenarios described. You may use an act more than once. ___ 2. Peter wants to dispute inaccurate information in his credit report. A. Fair Credit Reporting Act (FCRA) B. Fair Credit Billing Act (FCBA) C. Fair and Accurate Credit Transactions Act (FACTA) - ANSWER-A 1.2.12) Consumers have rights protected by fair credit laws. Indicate which credit regulation corresponds to the scenarios described. You may use an act more than once. ___ 3. Jen has been the victim of identity theft and wants to place a fraud alert on her credit file. A. Fair Credit Reporting Act (FCRA) B. Fair Credit Billing Act (FCBA) C. Fair and Accurate Credit Transactions Act (FACTA) - ANSWER-C 1.2.12) Consumers have rights protected by fair credit laws. Indicate which credit regulation corresponds to the scenarios described. You may use an act more than once. ___ 4. Mary wants to review her credit report for free. A. Fair Credit Reporting Act (FCRA) B. Fair Credit Billing Act (FCBA) C. Fair and Accurate Credit Transactions Act (FACTA) - ANSWER-C 1.2.12) Consumers have rights protected by fair credit laws. Indicate which credit regulation corresponds to the scenarios described. You may use an act more than once. ___ 5. Matt wants to limit his employers' access to his credit report. A. Fair Credit Reporting Act (FCRA) B. Fair Credit Billing Act (FCBA) C. Fair and Accurate Credit Transactions Act (FACTA) - ANSWER-A 1.2.7) Match the correct term to definition: ___ 1. Ratio of total credit extended to the amount of credit owed A. Account History B. Amounts Owed C. Length of Credit History D. Types of Credit Used E. New Credit - ANSWER-B 1.2.7) Match the correct term to definition: ___ 2. Variety of accounts (e.g., credit card, auto loan, mortgage) A. Account History B. Amounts Owed C. Length of Credit History D. Types of Credit Used E. New Credit - ANSWER-D 1.2.7) Match the correct term to definition: ___ 3. Number of recent credit inquiries, as well as new credit accounts A. Account History B. Amounts Owed C. Length of Credit History D. Types of Credit Used E. New Credit - ANSWER-E 1.2.7) Match the correct term to definition: ___ 4. Overall length of credit history in the report, as well as the average age of accounts A. Account History B. Amounts Owed C. Length of Credit History D. Types of Credit Used E. New Credit - ANSWER-C 1.2.7) Match the correct term to definition: ___ 5. Payment history of accounts, including late payments, delinquencies, judgments, and liens A. Account History B. Amounts Owed C. Length of Credit History D. Types of Credit Used E. New Credit - ANSWER-A 1.2.8) The following client is having trouble obtaining credit. Based on the information provided match the issue with the corresponding section of the FICO credit score. ___ 1. Roger has maxed out his credit card. A. Account History B. Amounts Owed C. Length of Credit History D. Types of Credit Used E. New Credit - ANSWER-B 1.2.8) The following client is having trouble obtaining credit. Based on the information provided match the issue with the corresponding section of the FICO credit score ___ 2. Molly is a recent college graduate trying to apply for her first credit card. A. Account History B. Amounts Owed C. Length of Credit History D. Types of Credit Used E. New Credit - ANSWER-C 1.2.8) The following client is having trouble obtaining credit. Based on the information provided match the issue with the corresponding section of the FICO credit score ___ 3. Kate's credit report displays several judgments and collection accounts. A. Account History B. Amounts Owed C. Length of Credit History D. Types of Credit Used E. New Credit - ANSWER-A 1.2.8) The following client is having trouble obtaining credit. Based on the information provided match the issue with the corresponding section of the FICO credit score ___ 4. Chris has three credit cards but no other accounts on his report. A. Account History B. Amounts Owed C. Length of Credit History D. Types of Credit Used E. New Credit - ANSWER-D 1.2.8) The following client is having trouble obtaining credit. Based on the information provided match the issue with the corresponding section of the FICO credit score ___ 5. April has applied for and received several credit cards and loans in the past six months, talking with a new lender each month. A. Account History B. Amounts Owed C. Length of Credit History D. Types of Credit Used E. New Credit - ANSWER-E 1.2.11) The following client needs to improve their credit. Match situation with an appropriate way to improve credit. A. Roger has maxed out his credit card. 1. Review budget to help find funds so that all monthly payments can become current. 2. Make more than the minimum payment to pay down the balances. 3. Apply for a secured credit card to establish history. 4. Notify credit reporting agencies. - ANSWER-2 1.2.11) The following client needs to improve their credit. Match situation with an appropriate way to improve credit. B. Molly is a recent college graduate trying to apply for her first credit card but has been denied. 1. Review budget to help find funds so that all monthly payments can become current. 2. Make more than the minimum payment to pay down the balances. 3. Apply for a secured credit card to establish history. 4. Notify credit reporting agencies. - ANSWER-3 1.2.11) The following client needs to improve their credit. Match situation with an appropriate way to improve credit. C. . Chris sees that a bankruptcy on his credit report actually belongs to his cousin, who has the same name. 1. Review budget to help find funds so that all monthly payments can become current. 2. Make more than the minimum payment to pay down the balances. 3. Apply for a secured credit card to establish history. 4. Notify credit reporting agencies. - ANSWER-4 1.2.11) The following client needs to improve their credit. Match situation with an appropriate way to improve credit. D. Kate's credit report displays several delinquencies, and she has received notices for repossession of her car. 1. Review budget to help find funds so that all monthly payments can become current. 2. Make more than the minimum payment to pay down the balances. 3. Apply for a secured credit card to establish history. 4. Notify credit reporting agencies. - ANSWER-1 1.2.13) Which complies with fair credit laws? A. An employer can check a credit report at any time. B. A vendor can display part of the credit card number on the sales receipt. C. A credit reporting agency can list information about a collection over eight years old. D. A creditor can acknowledge a consumer dispute after two months. - ANSWER-B 1.2.14) Which federal law protects a consumer's right to dispute a billing error associated with his or her credit card account? A. Fair and Accurate Credit Transactions Act (FACTA) B. Fair Credit Reporting Act (FCRA) C. Fair Credit Billing Act (FCBA) - ANSWER-C 1.3.1) Fee charged to invalidate a check before it is cashed. A. Overdraft Fee B. Stop Payment Fee C. NSF Fee D. Service Fee - ANSWER-B 1.3.2) Fee charged by a financial institution for account maintenance. A. Overdraft Fee B. Stop Payment Fee C. NSF Fee D. Service Fee - ANSWER-D 1.3.3) Fee charged when an account does not have enough money to cover a purchase and the financial institution loans money to complete the payment. A. Overdraft Fee B. Stop Payment Fee C. NSF Fee D. Service Fee - ANSWER-A 1.3.4) Fee charged if there is not enough money in an account to cover a check payment or other purchase. A. Overdraft Fee B. Stop Payment Fee C. NSF Fee D. Service Fee - ANSWER-C 1.3.5) When advising Patrice, you tell her she needs an account with all of the following fee structures and features, except: A. Mobile Banking B. Free Checks C. Free Wire Transfers D. Low Monthly Service Fee - ANSWER-C 1.3.7) All of the following arguments will be valuable to share with Jill to help her understand the importance of an emergency fund, except: A. Emergency funds can be used to cover living expenses while Jill looks for a new job, if she is laid off. B. Emergency funds placed in a liquid account can be retrieved when needed without taxes or penalties. C. Emergency funds will be available to use to purchase an electronic game for her daughter when Jill finds a great sale. D. It is ultimately cheaper to pay for emergency expenses from an emergency fund rather than on credit. - ANSWER-C 1.3.8) Which is the most appropriate use of Jill's emergency funds? A. Contributing to a mutual fund B. Upgrading a refrigerator C. Establishing a retirement fund D. Repairing the transmission on a car - ANSWER-D 1.3.9) Indicate the expense best paid for with (A)emergency fund or (B) short-term large purchase fund. ___ School Trips ___ Birthday Gifts ___ Living Expenses (During Unemployment) ___ Medical Bill ___ Electronics ___ Car Repair - ANSWER-Emergency Fund: -Living Expenses during unemployment -Medical Bill -Car Repair Short-Term Large Purchase -School Trips -Birthday Gifts -Electronics 1.3.10) To explain the importance of establishing a retirement fund to Alexis, you can present all of the following arguments, except: A. Her company might "match" a portion of the retirement funds that she contributes. B. She could benefit from certain tax incentives. C. She could borrow against the retirement investment if she has an immediate need for cash. D. Her investment could grow more if she begins investing earlier. - ANSWER-C 1.3.11) Which of the following information would be relevant to ask Richard in the session to determine if he is eligible for any of the tax credits outlined in this module 1.3? A. Where does he live? B. How is he submitting his taxes? C. Does he spend money on childcare? D. What is his credit limit? - ANSWER-C 1.3.12) Carlos has two children under the age of three that attend daycare, makes minimum wage at his job, & has not taken any courses beyond high school. He is likely eligible for all of the following tax credits, except: A. Earned Income Tax Credit (EITC) B. Child and Dependent Care Credit C. Educational Credit - ANSWER-C 1.4.1) Steps to Protect against Identity Theft A. Initiate a fraud alert. B. Shred financial documents. C. Cancel credit cards and order new bank cards. D. File a police report. E. Review bank and credit card statements. F. Contact the FTC. G. Safeguard personal identity information - ANSWER-B-E-G 1.4.1) Steps to Take after Identity Theft A. Initiate a fraud alert. B. Shred financial documents. C. Cancel credit cards and order new bank cards. D. File a police report. E. Review bank and credit card statements. F. Contact the FTC. G. Safeguard personal identity information - ANSWER-A-C-D-F 1.4.2) All of the following are immediate steps a client should take in the event of identity theft, except: A. Create an identity theft report. B. Contact the insurance company. C. Order credit reports from the credit reporting agencies. D. Place a fraud alert. - ANSWER-B 1.4.3) In some cases, bankruptcy may be the best option for a client. Which of the following options would be the least appropriate for a housing counselor to present as an alternative? A. Debt management plan (DMP) B. Household budget adjustment C. Loan modification D. Negotiation with creditors E. Wait seven years for accounts to drop from credit report - ANSWER-E 1.4.4) Which feature belongs with Chapter 7 bankruptcy 1. Liquidation of assets 2. Allows clients to retain certain secured debts, such as a house or car 3. Involves a repayment plan 4. Requires a means test 5. May be a better option for a client with no assets 6. May be a requirement for a client with regular income - ANSWER-1-4-5 note: Ch.7 AKA liquidation 1.4.4) Which feature belongs with Chapter 13 bankruptcy 1. Liquidation of assets 2. Allows clients to retain certain secured debts, such as a house or car 3. Involves a repayment plan 4. Requires a means test 5. May be a better option for a client with no assets 6. May be a requirement for a client with regular income - ANSWER-2-3-6 note: Ch.13 AKA wage earners plan 1.4.5) It is the responsibility of the counselor to determine whether or not a client should file bankruptcy. A. True B. False - ANSWER-B 1.4.6) match the Discussion Topics with the subject that the client has raised. __ 1. Unemployed client faces eviction and multiple credit card debts and other debts due to medical emergency A. Discussion about Predatory Lending B. Discussion about Bankruptcy - Chapter 13 C. Discussion about Identity Theft D. Discussion about Bankruptcy - Chapter 7 - ANSWER-D 1.4.6) match the Discussion Topics with the subject that the client has raised. ___ 2. Client receives multiple collection notices for unknown accounts/companies A. Discussion about Predatory Lending B. Discussion about Bankruptcy - Chapter 13 C. Discussion about Identity Theft D. Discussion about Bankruptcy - Chapter 7 - ANSWER-C 1.4.6) match the Discussion Topics with the subject that the client has raised. ___ 3. Client with low income and good credit receives loan offer with terms that are twice the market rate A. Discussion about Predatory Lending B. Discussion about Bankruptcy - Chapter 13 C. Discussion about Identity Theft D. Discussion about Bankruptcy - Chapter 7 - ANSWER-A 1.4.6) match the Discussion Topics with the subject that the client has raised. ___ 4. Client with low income has fallen behind on several unsecured loans and now faces foreclosure, but wants to try to keep his family in the home A. Discussion about Predatory Lending B. Discussion about Bankruptcy - Chapter 13 C. Discussion about Identity Theft D. Discussion about Bankruptcy - Chapter 7 - ANSWER-B 1.4.6) match the Discussion Topics with the subject that the client has raised. ___ 5. Client cannot obtain credit despite knowledge that s/he has no negative accounts A. Discussion about Predatory Lending B. Discussion about Bankruptcy - Chapter 13 C. Discussion about Identity Theft D. Discussion about Bankruptcy - Chapter 7 - ANSWER-C 2.1.1) Determine which housing option appears best for each client. Mark "A" for renting and "B" for buying. ___ 1. Bob is averse to financial risks. ___ 2. Jan has saved a significant amount of money in order to comfortably pay a down payment and closing costs. ___ 3. Jenny really enjoys interior design and would like to make her home exactly how she wants it. ___ 4. Rachel takes great satisfaction in doing her own home repairs.