1. Understanding your credit score
What is a credit score? Why is it important?

2. Target What determines credit character?
Identify the components of a credit score.
Recognize the importance of having good credit.
What number range indicates EXCELLENT credit?

3. What is a credit score?

4. What is a credit score?
3-digit number used to determine an individuals credit worthiness

5. What factors determine your credit score?
Payment History-35%
Amount of money owed- 30%
Length of credit history- 15%
Credit Mix- 10%
New Credit-10%

6. What are the scores? Everyone starts out with no credit score.
Average-687
3 agencies report credit scores: Experian, Transunion, & Equifax

7. Activity:
Categorize the statements given by determining what is “true” and “false” regarding your credit score.
TRUE
FALSE

8. Why are scores important?
Determines whether or not you qualify for a loan
Upon qualifying it determines how much you will pay for the loan via interest.
Insurance companies may use the information to decide whether you can get insurance and to set the rates you will pay.
Employers may use your credit report, if you give them permission to do so, to decide whether to hire you.
Telephone and utility companies may use information in your credit report to decide whether to provide services to you.
Landlords may use the information to determine whether to rent an apartment to you.

9. Terms to Know
Credit Reports- Summary of the factors that affect your credit; 3 Major Reports (TransUnion, Equifax, Experian)
The Fair Credit Reporting Act (FCRA) requires each credit reporting agency to provide you with a free credit report once a year.
Delinquency- failure to pay an outstanding debt
Collections- long term outstanding debts are sold to separate agencies in order to collect
Bankruptcy- a legal status in which a person can not repay the debts it owes to creditors
Inquiries- legitimate businesses check your credit

10. How do they effect your credit?
Delinquency: Each time you are days behind on a payment it is reported to the credit agency and a deduction occurs.
Collections: Once a delinquent debt is sent to collections it takes 7 years to fall off your report. (These REALLY hurt you!)
Bankruptcy: Wipes away debt (+), remains on credit report for years, difficult to obtain any form of loan, can lead to a 100 pt or more deduction in score
Inquiries: “Soft” inquiries have a minimal effect; “Hard” inquiries (applying for lots of credit cards) has a strong effect.

11. 5 C’s of Credit http://www.investopedia.com/terms/f/five-c-credit.asp
Watch video and define with detail the following:
Character-
Capacity-
Collateral-
Conditions-
Capital-

12. 5 C’s of Credit
Character- Primarily determined by your credit score, includes past foreclosures, evictions, repossessions
Capacity- Ability to repay a debt
Collateral- Property used to secure the loan
Conditions- Employment history; current market conditions; interest rates
Capital- How much risk is the borrower willing to take?

13. Article Review
Read the article titled, “5 Reasons Your Credit Score Is More Important Than Your GPA” 1. 2. 5. 4. 3.

14. Exit Ticket
(True/False) If you make a late payment, it could have a negative affect on your score.
(True/False) Landlords may use your credit score to determine rental eligibility.
(True/False) For your class credit score project- a tardy, excused or unexcused, results in a negative mark.
Once a debt is sent to collections how many years does it take to fall off your credit report?
What is the average credit score in the United States?