Credit scores & Creditworthiness
Learning Outcomes Students will learn how using credit cards can impact their credit reports and credit scores. Students will learn how all of the information on a credit score can affect different aspects of your life. 2015 Educurious Partners--All rights reserved Credit Scores
Lesson Tasks Discuss the cost of using a credit card to purchase something you really want and only making the minimum payments Discuss the importance of managing credit card payments Complete the Cautious Consumer Higher Payments activity Discuss a scenario illustrating the importance of a good credit score Discuss and define what a credit score is and the range from poor to excellent Discuss why students want a good credit score and how to check it Complete the Cautious Consumer Reflection 2015 Educurious Partners--All rights reserved Credit Scores
Creditworthiness
What is Creditworthiness? An assessment of the likelihood that a borrower will repay or default on his or her debt obligations. It is based upon factors, such as his/her history of repayment and credit score. 2015 Educurious Partners--All rights reserved Credit Scores
Credit Report vs. Credit Score Watch this video to understand what a Credit Report and Credit Score is’ Video: What is the difference? 2015 Educurious Partners--All rights reserved Credit Scores
Why Your Credit Report Matters Good Credit Report Bad Credit Report Saves YOU money Costs YOU money Qualify for loans and credit cards Prevent you from obtaining a loan or credit cards; jeopardize future purchases Lower interest rate on borrowed money Prevent you from obtaining a good interest rate Low cost on car and home insurance Higher cost on car and home insurance Obtaining employment Prevent you from getting a job 2015 Educurious Partners--All rights reserved Credit Scores
What’s on a Credit Report? Detailed information about your financial profile Includes your credit experiences such as: Your bill-paying history The number and types of accounts you have Late payments Collection actions Outstanding debt Age of accounts Includes identifying information such as: Employment history Social Security Number Address Recent inquiries Public record 2015 Educurious Partners--All rights reserved UNIT 3 LESSON 8
Who Is FICO? A credit score is a number calculated by FICO (Fair, Isaac, and Company). 2015 Educurious Partners--All rights reserved Credit Scores
Importance of Credit reports
What is a “Good” Credit Score? Watch this video to learn about what is a good credit score: EXCELLENT GOOD AVERAGE POOR 2015 Educurious Partners--All rights reserved Credit Scores
US Breakdown of Credit Scores in 2014 2015 Educurious Partners--All rights reserved Credit Scores
Average Credit Score by Age 2015 Educurious Partners--All rights reserved Credit Scores
What Determines Your Credit Score? 2015 Educurious Partners--All rights reserved Credit Scores
When Do You Start “Earning” a Credit Score You do NOT automatically have a credit score on your 18th birthday You start earning a credit score when something is posted to your Credit Report by either: Obtaining a credit card or loan Being a co-signer on a credit card or loan Without building credit can cause an individual to be denied credit Watch this video to learn how to start building your credit: 2015 Educurious Partners--All rights reserved Credit Scores
Importance of your credit score
Credit Score Research Complete the How Can I Improve My Credit Score activity 2015 Educurious Partners--All rights reserved Credit Scores
Ways to Hurt Your Credit Score? Paying bills late (also usually means a late fee and higher interest) Max out credit card or charged over limit of credit card Applying for several in a short amount of time Having an account sent to collections Sudden spike in debt balances Private or government liens Watch the video! No credit established yet Closing old credit cards Ignoring inaccuracies Defaulting on a loan Filing bankruptcy Home foreclosed Unemployment
Ways to Raise Your Credit Score Request a credit line increase. Increasing your credit line will improve your credit utilization ratio, which is the percentage of your credit limit you've used, and help your credit score. Consolidate Don’t apply for new credit Check your credit report Don't be late Be patient Don't become a victim Keep balances low (30% is optimal) Get rid of small balances Keep “GOOD” old credit on report (don’t close accounts) 2015 Educurious Partners--All rights reserved Credit Scores
Comparing Credit Score Impacts http://credit.org/blog/what-is-a-good-credit-score-infographic/ 2015 Educurious Partners--All rights reserved Credit Scores
Checking Your Credit Score To be aware of your credit before you make a big purchase To check the accuracy of the information recorded on your report Go to www.annualcreditreport.com Check your credit score by requesting it for free every four months from Equifax, Experian, Transunion 2015 Educurious Partners--All rights reserved Credit Scores
Tale of Two Credit Scores Complete the A Tale of Two Credit Scores activity 2015 Educurious Partners--All rights reserved Credit Scores
Review & complete
Review How can using credit cards impact credit reports and credit scores? What are some different aspects of your life in the future that might be affected by your credit score? 2015 Educurious Partners--All rights reserved Credit Scores
Review Answers How can using credit cards positively or negatively impact credit reports and credit scores? Possible answers may include: Lower interest rates More possibilities for types of cards Not establishing a good line of credit Maxing out a credit card What are some different aspects of your life in the future that might be affected by your credit score? Qualifying for home, car, or business loans Employers may request your financial records Landlords may want to see your credit scores before renting to you. Qualifying for other types of credit cards. 2015 Educurious Partners--All rights reserved Credit Scores
Complete the Lesson… Now complete the Credit Score Quiz 2015 Educurious Partners--All rights reserved Credit Scores