© 2014 Junior Achievement USA, M1205 – Debit and Credit PowerPoint JA Finance Park will help you build a foundation for making intelligent, lifelong personal financial decisions. Topics include income and saving, credit and debit, and budgeting. © 2014 Junior Achievement USA, M1205 – Debit and Credit PowerPoint JA Finance Park Debit and Credit

Have you ever been asked to loan money to a friend? Consider the following scenarios

You have $1,000 in a savings account You have $1,000 in a savings account. A good friend comes to you and asks for $300 to by a bike. Your friend will use the bike to ride to and from a new job where she will earn $100 a week, $25 of which will go toward paying you back each week. Do you loan your friend the money? Why or why not?

You have $1,000 in a savings account You have $1,000 in a savings account. Someone you don’t know knocks on your door and asks for $300. She tells you she needs the money to buy a bike to get to and from work. She assures you that she will earn $150 a week and can pay your $50 each week toward paying off the loan. Do you loan this person the money? Why or why not? What would you want to see or to know about a person before giving him or her money?

Credit report: A record of a person’s financial information, including previous addresses, Social Security number, current and previous employers, estimated income, credit card accounts with amount owed and payment history, and loan information. Credit Score: A standardized measurement of the potential to repay a debt. JA Finance Park Debit and Credit

Do you pay your bills on time? Do you miss payments? How many credit accounts do you have? Have you paid off a loan before? Are you maxed out? Are you near your credit limit? Do you have outstanding debt? How much? JA Finance Park Debit and Credit

Exceeding your credit limit. Applying for credit frequently. Making late payments. Exceeding your credit limit. Applying for credit frequently. Having an account turned over to a collection agency. JA Finance Park Debit and Credit

Good Debt The term used when debts are paid on time. This reflects well on a consumer’s credit record

Credit Score Credit score influences the credit available to a consumer. If a potential borrower has a high score, the bank will loan money with the expectation that it will be paid back in a timely fashion.

Equifax, experian, and transunion—must provide consumers with a free copy of their credit report, upon request, once every 12 months by law. JA Finance Park Debit and Credit

A FICO score considers five categories of credit data. 10% New credit 10% Types of credit used 15% Length of credit history JA Finance Park Debit and Credit 30% Amounts owed 35% Payment history Source: www.myfico.com

Credit Scores Range from 300-850 The higher the credit score the better- means the person is a low risk lender A score of 720 or above is considered very good to excellent Below 600 is a potentially poor credit risk Late payments, exceeding the credit limit, applying for credit frequently, and having an account turned over to a collections agency will affect consumer’s credit score.

Credit Type Score Range Very Good to Excellent 720–850 Fair to Good 660–719 Fair 600–659 Bad 300–599 *FICO is an acronym for the Fair Isaac Corporation, founded in 1956 by engineer Bill Fair and mathematician Earl Isaac. Together, they developed the formula for the FICO score, the credit risk measurement that is used most around the world. JA Finance Park Debit and Credit

Choose a credit card carefully. Look for no annual fees / low interest rate. Use credit to build a payment history. Don’t charge more than you can pay. Pay your bills on time—don’t skip payments. JA Finance Park Debit and Credit