Ok, ok, I know you probably think this title is just another example of click bait. No, actually, this activity engages students while teaching them about credit scores. Most teachers dread having to teach credit scores and wonder”how can I bring credit scores to life?” I posted last year on an inquiry-based project on credit scores that got great reviews at an NGPF workshop. I got an opportunity yesterday to use a modified version of the same Credit Score project with my Summer Bridge class at Eastside Prep for incoming 9th graders (co-teaching with Bill Elmore and Ben Bisconti). Anytime a credit score lesson can generate controversy and buzz in the classroom, I consider it a success! In this activity, students analyze and discover that the same car can cost wildly different amounts based on a buyer’s credit score. They also discover that being a “credit invisible” can have negative repercussions.

Here is the lesson progression:

1. What do you know about credit scores? (discussion question)
2. Watched three minute video that provides the basics for credit scores and credit reports (I focus on two most important factors of paying on time and not having too much debt rather than describe all five factors). I stopped the video at certain points to ask them questions.
3. Reviewed detailed credit profiles of three college students (Jessica, Samantha and Jenna) are asked to rate them qualitatively from Poor to Excellent. Jessica and Samantha’s ratings were quite obvious but there was a great discussion of how to rate Jenna who, in industry parlance, had a thin credit file. This became a perfect set-up to discuss the importance of establishing a credit history as many were disappointed to hear that Jenna might have trouble getting a car loan or renting an apartment. Here’s a good resource with ways for young people to establish a credit history.
4. As a class we translated those ratings into numerical credit scores on the 300-850 range. This reinforced the concept that the better your credit behaviors the higher your score.
5. Now it was time to translate those scores into a cost of borrowing or more specifically how much a new mini-Cooper would cost for each of our college students. We walked through the loan calculator provided by FICO and had students independently complete Steps 4 and 5 on their worksheet.
6. This led up to the ultimate question for them to answer: What is the cost of bad credit? OR How much more will Samantha pay for the same car as Jessica? Bill had a great example that even if Samantha was able to negotiate a lower price for the car (say, $19,000), she would still be worse off due to the cost of bad credit.

Enjoy!

Edit 10/14/16: When Jessica revamped our entire Unit 4, she elaborated on this lesson even further. Here are the two parts to the activity as they currently exist in our Activity Bank:

[google-drive-embed url=”https://docs.google.com/a/nextgenpersonalfinance.org/document/d/1hkzZrcdoKIeubycSwxR-U965Q3GFjMHf8MnMRdAoI7A/edit?usp=drivesdk” title=”CALCULATE: FICO Credit Scores” icon=”https://ssl.gstatic.com/docs/doclist/images/icon_11_document_list.png” newwindow=”yes” style=”normal”]

[google-drive-embed url=”https://docs.google.com/a/nextgenpersonalfinance.org/document/d/1BIMclwi_3YN1xOH-6Uw8feJHBzCPsWVJBB4OqwgKKfI/edit?usp=drivesdk” title=”CALCULATE: Impact of Credit Score on Loans” icon=”https://ssl.gstatic.com/docs/doclist/images/icon_11_document_list.png” newwindow=”yes” style=”normal”]

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.