2 copyright © texas education agency, 2012. all rights reserved. copyright © texas education...

Credit Scores and Your Financial Future

2Copyright © Texas Education Agency, 2012. All rights reserved.

Copyright © Texas Education Agency, 2012. These Materials are copyrighted © and trademarked ™ as the property of the Texas Education Agency (TEA) and may not be reproduced without the express written permission of TEA, except under the following conditions:1)  Texas public school districts, charter schools, and Education Service Centers may reproduce and use copies of the Materials and Related Materials for the districts’ and schools’ educational use without obtaining permission from TEA.2)  Residents of the state of Texas may reproduce and use copies of the Materials and Related Materials for individual personal use only, without obtaining written permission of TEA.3)  Any portion reproduced must be reproduced in its entirety and remain unedited, unaltered and unchanged in any way.4)  No monetary charge can be made for the reproduced materials or any document containing them; however, a reasonable charge to cover only the cost of reproduction and distribution may be charged.Private entities or persons located in Texas that are not Texas public school districts, Texas Education Service Centers, or Texas charter schools or any entity, whether public or private, educational or non-educational, located outside the state of Texas MUST obtain written approval from TEA and will be required to enter into a license agreement that may involve the payment of a licensing fee or a royalty.For information contact: Office of Copyrights, Trademarks, License Agreements, and Royalties, Texas Education Agency, 1701 N. Congress Ave., Austin, TX 78701-1494; phone 512-463-7004; email: copyrights@tea.state.tx.us.

3Copyright © Texas Education Agency, 2012. All rights reserved.

What is a Credit Score?

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Credit ScoreA number assigned to a person that indicates to

lenders their capacity to repay a loan.The number is between 300 and 850

The higher your score, the lower the risk to lenders.

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What is a credit score?

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Searching for an apartment or house

Job opportunities

Better interest and insurance rates

More opportunity

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Importance of a Good Score

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Paying bills lateToo many delinquent accountsRequesting too many credit reportsToo many credit cardsExcessive debt amountFiling for bankruptcy

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Factors Effecting Your Credit Score

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This scoring system formula, developed by FICO™, is used to help lenders evaluate the risk for potential lenders.

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Predicting Your Credit Risk

Payment History

35%

Amount Owed30%

Types of Credit15%

New Ac-

counts10%

Credit History Length10%

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Excellent850-750

Good749-650

Fair649-600

Poor599-300

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Credit Score Scale

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You are entitled to a free credit report once a year from each of the following credit bureaus:

• Equifax• www.equifax.com

• Experian• www.experian.com

• Trans Union• www.tuc.com

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Obtaining Your Credit Score

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Pay monthly bill on timeOpen a line of credit and use it responsiblyDon’t “max out” your credit cardKeep line of credit with one companyMonitor creditKeep track of finances

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Building a Solid Credit History

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Debbie has four credit cards. Two of the four cards have reached the available credit limit and the other two cards have used 50% of their available credit limit. Debbie has never missed a payment and always

makes the minimum payment on the cards. She is in the process of relocating and is looking for places to live. Four different property management companies have run credit reports to check her financial history.

What factors could negatively effect Debbie’s credit score?

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Identifying the Red Flags of Credit Scores

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Images:Microsoft Office Clip Art: Used with permission from

MicrosoftWebsites:Consumer’s Guide: Credithttp://www.federalreserve.gov/creditcardCredit Union National Associationhttp://anytime.cuna.org/15608/index.phpFinancial Literacy Nowhttp://www.financiallitnow.org/index.shtmlPractical Money Skills https://www.practicalmoneyskills.com

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Resources and References