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Bethanie Ford
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**This slide is automated and set to advance in 3 parts upon click of the mouse** 1. Challenge students to explain in their own words what credit means. 1.Credit represents money advanced which needs to be paid back.

2 **This slide is automated and set to advance in 3 parts upon click of the mouse** 1. Challenge students to explain in their own words what credit means. 1.Credit represents money advanced which needs to be paid back. 2.Have a student read the definition of credit The students may not know what the bold font words mean, so ask them to define them. Have a student react to the definition s and have one student record the ones given by peers. Do not comment on the definitions. At the end of the module, have students revisit their definitions. 3

**This slide is automated and set to advance in 4 parts upon click of the mouse** 1. Challenge students to explain given the slide What are some good uses of credit?

3 **This slide is automated and set to advance in 4 parts upon click of the mouse** 1. Challenge students to explain given the slide What are some good uses of credit? Ask them to provide for their own families or selves examples of good uses credit. 2. Briefly discuss the list of good uses. 3. Ask the students what are some bad uses of credit? 4. Briefly discuss bad uses. 5. Encourage students to offer examples of good or bad uses of credit their families or older siblings are currently employing. 6. Invite them to identify for next session a neighborhood business or community group that can share a case study or oral history of its successful or unsuccessful use of credit. 4

Briefly explain and compare installment and revolving credit. For classroom purposes, we will mainly focus on credit cards as revolving credit.

4 Briefly explain and compare installment and revolving credit. For classroom purposes, we will mainly focus on credit cards as revolving credit. The italicized words should be explicated by students to assure that their understanding of the terms is correct. You may also want to briefly explain that mortgages and student loans are 2 other common forms of loans, but will be further discussed in later modules. Tap student leadership, positive youth development, self management-controlling impulses and family collaboration /participation by asking students to share these terms with parents. If desired bring in a school student teacher or educator doing a field observation to offer students insight about these types of credit or community member who works as a car salesperson. (Go over basics of each if time allows) Installment Credit is: Typically for large purchases, such as car or computer. Loan term can vary from a few months to many years. Monthly payment amounts are often set for the entire term. Usually has a lower interest rate than a credit card. The loan purchase may or may not be used as collateral. Usually obtained at banks, auto dealers, or other financial institutions. Revolving Credit: Mostly used in the form of credit cards. Can be used just about anywhere. No set term. Monthly minimum payments vary, based on current balance. Usually contains the highest interest rate out of all loan types. **Define Collateral for the student. (this a post-assessment test question) If you get a mortgage, your collateral would be your house. If you stop making your monthly house payments, the lender can take possession of the home through a process called foreclosure and sell it to get back the principal it lent you. In margin trading, the securities in your account act as collateral in case of a margin call. Similarly, if you were to stop making your payments on an auto loan, the lender would seize your vehicle. When you borrow money with a credit card, however, there is no collateral, so credit card debt carries a significantly higher interest rate than mortgage debt or auto loan debt. Challenge students if appropriate to discuss whether it is preferable to borrow using collateral or minus collateral but with a significantly higher rate of interest. 5

5 Double click on PDF to launch file You may want to take this time to go over the sample credit card hand out and have students find specific terms and items within the statement. 6

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7 Based on what you have seen so far can you think of three key benefits of credit? Credit cards can be dangerous if not used responsibly and may distract you from your SMART goals. Can you name some risks of credit? Engage artists in developing pro and anti credit posters or slogans. Tap family experiences by giving students the option of going home to interview a select family member or adult friend about credit or record a commercial on television or radio which promotes use of credit cards. Have students reflect as self aware young leaders on this outside research and the extent to which it validates this module study of credit. 8

8 Student artists can be challenged to create a comic character who can in 4-9 storyboard panels teach these basics. Student leaders can create a pre and post assessment for PTA or community board presentation in the form of a Credit IQ- Good versus Bad and samples can be uploaded to the school web site. 9

9 Briefly review the credit rates above. 10

FICO stands for Fair Isaac Corporation The exact formulas for calculating credit scores are closely-guarded secrets, FICO has disclosed the following components and the approximate weighted

10 FICO stands for Fair Isaac Corporation The exact formulas for calculating credit scores are closely-guarded secrets, FICO has disclosed the following components and the approximate weighted contribution of each: 35% Payment History Late payments on bills, such as a mortgage, credit card or automobile loan, can cause a consumer s FICO score to drop. Paying bills as agreed over time will improve a consumer s FICO score. 30% Credit Utilization - The ratio of current revolving debt (such as credit card balances) to the total available revolving credit (credit limits). Consumers can improve their FICO scores by paying off debt and lowering their utilization ratio. The closing of existing revolving accounts will typically adversely affect this ratio and therefore have a negative impact on their FICO score. 15% Length of Credit History As consumer s credit history ages, assuming they pay their bills, it can have a positive impact on their FICO score. 10% Types of Credit Used (installment, revolving, consumer finance) Consumers can benefit by having a history of managing different types of credit. 10% Recent search for credit and/or amount of credit obtained recently - Multiple credit inquiries for a consumer seeking to open new credit, such as credit cards, retail store accounts, and personal loans, can hurt an individual s score. Applying for lots of new credit in a short period of time is also viewed as risky and can cause a drop in an individual s score. However, individuals shopping for a mortgage or auto loan over a short period will likely not experience a decrease in their scores as a result of these types of inquiries. Challenge students as potential leaders for younger peers and supports for their parents to come up with tips for older siblings establishing a credit history. Another family engagement project would be to have students watch credit report commercials such Credit Karma and Discover and critique theextent to which their claims are accurate. 11

11 Explain why freecreditreport.com is NOT a good choice. Site claims it is a free service but once you sign up, there is a monthly fee that is charged and the contract Is very difficult to break. Therefore this is a falsely advertised service. Challenge students to identify other false credit claims in local newspapers and online. Suggest students as leaders create a short brochure or poster warning adults to be aware of these claims. 12

12 Have students begin to be self aware by considering who in their families might cosign for their older siblings or not. Gave students interview adults to find out if any have co-signed for their family members or why they would not co-sign. 13

13 Go through this example and ask the students if they think this is a good use of credit, why? Why not? Two students can be chosen for this role play and one should stay outside the class as each does the role play which can be audio recorded. Have the class as a whole listen to both role plays and the critique or reflect on the credit decisions and details offered to support them. 14

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Shopping for an Automobile Loan. What Do I Need to Know?

Shopping for an Automobile Loan What Do I Need to Know? Automobiles 2 nd most expensive purchase for most consumers Usually purchased with Loan / credit Or cash if you have enough (uncommon) Ask yourself: