Keys to Your Financial Future Module 2-Good Credit: Your score in the game of life Session Outcomes



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Section #9: Character Part 2: Credit Scores (OPTIONAL)


Estimate of Time:

20 minutes

Pages in Participant Workbook:

53 – 59


Materials Required:

  • Credit scoring card sets printed on 2” X 3 ½” business cards (Avery 8371) for participants in Groups of 3

  • Prepared visual aid: FICO Score Distribution (Visual Aid 2.20)

Facilitator Instructions


Materials, Visual Aids & Notes

Facilitated Discussion

Use the following talking points and questions to facilitate a discussion.

  • What is the difference between a credit report and credit score?

After a few responses, summarize by stating:

  • A credit report is a document that contains some of your bill paying history as well as information from the courts and collection agencies.

  • A credit score is a number.




  • What is a credit score?

After a few responses, summarize by stating:

  • A credit score is a number generated entirely from information on your credit reports. It is supposed to predict the likelihood that you will pay your bills on time and in full.



  • Why should I care about my credit scores?

After a few responses, summarize by stating:

  • Businesses use them to make decisions about you--banks, credit unions and other creditors or lenders, landlords and insurance agencies. They use them because it’s quicker to understand a score than it is to read an entire credit report. It saves them time and money.



  • Who makes them?

After a few responses, summarize by stating:

  • All three credit reporting agencies make their own credit scores:

    • Experian has the Experian Credit Score also called the PLUS Score. (This is the score advertised on television with the guy playing the guitar.)

    • Equifax has the Equifax Credit Score™.

    • Transunion has the TransRisk Score

  • The most commonly used credit scores, come from FICO, Fair Isaac Corporation.



  • What is a good one?


After a few responses, summarize by stating:

  • FICO scores range from 300 to 850. The higher the better. Most people consider between 700 and 720 and up a good credit score.

Exercise in Triads
Use the following talking points and instructions to facilitate the exercise in triads.

  • You are going to calculate a credit score for one person over the course of many months using KEY ACTIVITY—What Makes Your Score Go Up or Down?

  • You need to appoint one person the reader. This person will read each card. DO NOT READ WHETHER THE SCORE GOES UP OR DOWN OR BY HOW MUCH UNTIL AFTER YOUR TWO TEAMMATES HAVE HAD A CHANCE TO GUESS.




  • After each card is read, the other two people will guess whether the score goes up or down as a result of the individual.

  • One of the guessers should also be a recorder and keep track of each transaction, how much it made the score go up or down, and the ending score after each transaction.

  • Following the exercise ask participants to share their final credit score.

Note to Facilitator: While the triads should come up with the same result, they may not due to math errors. This should be overlooked because the purpose of the exercise is about watching.

  • What made your score go up?

  • What made your score go down?




  • Go over the composition of the score and relate their contributions to one of the pieces of this pie.

  • Ensure participants understand credit utilization rate. Explain that percentage of credit used on revolving accounts should be 30% or below.

Note to Facilitator: This concept is discussed a little further below.

  • Ensure participants understand the example contained ESTIMATED impacts. (These are loosely based on an example developed by FICO and the Consumer Federation of America.) Explain that it is impossible to predict exactly how much one transaction will affect a score overall because the score is actually calculated using an algorithm. Any one action is calculated based on everything else happening in your report as well as how you compare to others.

Stand Up, Sit Down (Voting by standing)

Use the following talking points and instructions to facilitate the activity.

  • Have participants stand up if they think the item read is factored into their credit scores. Read each item relatively quickly.


Note to Facilitator: Do not read the answer until people have stood up or remained in their seats.

Item

Yes—Participants Should Be Standing

Age




Salary




On time payments

YES

Religion




How long they have had credit

YES

Different kinds of credit—both installment loans and revolving credit

YES

Receiving public assistance




Inquiries to open new credit accounts

YES

Employment history




Participation in credit counseling services




Percentage of available credit used

YES

Late payments

YES

Summarize using the following:

  • The information in your scores comes from what is in your credit reports. If you are under 18 and don’t have a credit report, then you don’t have credit scores.

  • The companies that make credit scores are developing new scores that will reach beyond the information in your credit score—they may look at payday loans, health club membership, rent payments and more. What does this mean for you? You may be able to develop a “score” more quickly, but more things will affect your scores.



Page 53

Write participant responses on flip chart paper.

Pages 53 and 54

Write participant responses on flip chart paper.

Page 54

Write participant responses on flip chart paper.

Page 53

Write participant responses on flip chart paper.

Give each group of three a set of cards.

Pages 55 and 56

Write participant responses on flip chart paper.

Page 57

FICO Score Distribution (Visual Aid 2.20)

Pages 58 and 59



Section #10: Closing (0ptional)


Estimate of Time:

5 to 10 minutes depending on group size

Pages in Participant Workbook:

None

Materials Required:

  • Brightly colored paper for participants to make airplanes.




Facilitator Instructions


Materials and Visual Aids

Most Surprising Thing” Airplane Toss

Use the following talking points and questions to facilitate a discussion.

  • You have learned about credit,

  • You can explain the difference between credit and debt and how credit works.

  • You can use key credit terms like principal, interest and APR and explain how credit decisions are made.

  • You know where and how to get your credit reports whether you are under 18 or 18 and older,

  • And you can explain how credit scores work and are calculated.

  • This is one of the most important financial education topics because positive credit reports and high credit scores are productive assets. They can help you:

  • Poor credit histories and credit scores or no credit history can close doors.

  • With the piece of paper, write the one thing that most surprised you from the session.

  • Make it into an airplane.



  • Tell young people to fly their planes.

  • Instruct participants to pick up the plane that is closes to them and read what is on the airplane to end the session.

Blank Flip Charts for Recording Participant Contributions

Brightly colored paper for participants to make airplanes.


Tools for Module 2—Good Credit: Your score in the game of life

Card AYour role: Lender

  • Use the following script to act out the skit. Your lines are the “lender” lines. They are bolded.



  • Words that are italicized are acting instructions. Please feel free to add your own actions and words to the skit.

Borrower: Good afternoon. My name is (INSERT MADE UP NAME) and I would like to borrow some money to start my business.



Lender: Great! Here at Community Bank we love to support businesses. Do you have a business plan?

Borrower: I do! Here it is. (Hand file folder or some paper to the lender.)



Lender: Flip through business plan. It seems you only want to borrow $1000 for some basic equipment. Is this correct?

Borrower: Yes. It’s just what I need to start my office cleaning business.



Lender: Well, here is your loan. Give borrower 10 $100 bills. Count them out as you give the loan. You can borrow this for 12 months at 10%. So next month you will owe $110 dollars.

***NEXT MONTH***

Borrower: Well, I’m here to pay my loan. $110 dollars. Give the lender $100 and then $10.

Borrower: Based on my calculations, I only owe $890 on my loan.

Lender: Well, not quite. You owe $900.

Borrower: Wait, I don’t understand.



Lender: Let’s see if there is someone who can explain it to you.

Facilitator asks group to explain why the balance on the loan is $900 NOT $890.





Card BYour role: Borrower

  • Use the following script to act out the skit. Your lines are the “borrower” lines. They are bolded.



  • Words that are italicized are acting instructions. Please feel free to add your own actions and words to the skit.

Borrower: Good afternoon. My name is (INSERT MADE UP NAME) and I would like to borrow some money to start my business.

Lender: Great! Here at Community Bank we love to support businesses. Do you have a business plan?



Borrower: I do! Here it is. (Hand file folder or some paper to the lender.)

Lender: Flip through business plan. It seems you only want to borrow $1000 for some basic equipment. Is this correct?



Borrower: Yes. It’s just what I need to start my office cleaning business.

Lender: Well, here is your loan. Give borrower 10 $100 bills. Count them out as you give the loan. You can borrow this for 12 months at 10%. So next month you will owe $110 dollars.



***NEXT MONTH***

Borrower: Well, I’m here to pay my loan. $110 dollars. Give the lender $100 and then $10.

Borrower: Based on my calculations, I only owe $890 on my loan.

Lender: Well, not quite. You owe $900.



Borrower: Wait, I don’t understand.

Lender: Let’s see if there is someone who can explain it to you.



Facilitator asks group to explain why the balance on the loan is $900 NOT $890.



Keys to Your Financial Future

Facilitator’s Guide

Module 2—Good Credit: Your score in the game of life
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