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Junior and Senior level Ag Bus. | |Colorado Agriscience Curriculum

|Section: |Advanced Agribusiness |

|Unit: |Agricultural Business Records |

|Lesson Title: |Credit Risks |

|Colorado Ag Education Standards|AGB11/12.03 - The student will be able to formulate and analyze financial records and use the information for|

|and Competencies |evaluation and planning. |

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| |Understand credit risks. |

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|Colorado Model Content |English Standard 1: Students read and understand a variety of materials. |

|Standard(s): | |

| |English Standard 4: Students apply thinking skills to their reading, writing, speaking, listening, and |

| |viewing |

| | |

| |English Standard 5: Students read to locate, select, and make use of relevant information from a variety of |

| |media, reference, and technological sources. |

|Student Learning Objectives: |The student will be able to identify three factors of credit risks. |

| |The student will be able to identify three ways to manage their credit score. |

|Time: |50 minutes |

|Resource(s): |A paper with a number representing a credit score for each of your students. |

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|Instructions, Tools, Equipment,|Italicized words are instructions to the teacher, normal style text is suggested script. |

|and Supplies: | |

|Interest Approach: |As your students walk into the room hand them each a piece of paper with a credit score on it. |

| |Please hold on to the paper I am going to hand you, grab your notebook and have a seat. |

| |When I say GO you will have 30 seconds to divide yourselves into groups based on the number in front of you. |

| | |

| |Find your classmates that have a score in the same 50 increments as you and find a place to sit together. |

| |(550-600, 601-650, 651-700 etc.) Any questions? |

| |Go! Look around at the group of people you’re with! |

| |Believe it or not, that simple little three-digit number in front of you can have a huge impact on how you |

| |live your life. Let’s imagine for a minute we are 5 years down the road and you want to purchase your first |

| |starter house. |

| |You do not have enough money in the bank to pay for it all at once so what are your options? |

| |Elicit responses. We are shooting for getting a loan. |

| |That is exactly right - you may need to get a mortgage loan so you can pay off your home over a longer time |

| |period. |

| |As you continue to imagine let’s say you make an appointment with the local mortgage company and present the |

| |home you want to purchase. |

| |The lender asks for your social security number, makes a few simple clicks on his/her computer and. . . . |

| |BAM! |

| |Whether or not you can get a loan is determined just like that. |

| |Now take a look at your numbers and tell me if you think you would be approved or not. Ask the students to |

| |justify their responses. |

| |Elicit responses. |

| |If your score is above 760, the lender will likely loan you the money at a good rate. |

| |If your score is from 600-700 you may get the loan but probably at a higher interest rate |

| |If your score is below 600 you will pay a much higher rate if you can even get a loan. |

| |By a show of hands what score do you want to have? |

| |How many of you want a score of 600 or below? |

| |How many are shooting for 600-700? |

| |How many of you want a score of 700 or above? |

| |You are exactly right, 700 or above are where you want to keep your score. |

|Objective 1: |Handout a copy of “Ignorance is not Bliss When it Comes to Knowing |

| |Credit Score” to each group or individuals if you wish. |

| |We are going to take the next several minutes to read the article I passed out to you on Credit Scores. You |

| |will need to use it answer the questions on the worksheet I am going to give you. |

| |After completing the worksheet – each of you will need to complete the graphic organizer and prepare yourself|

| |for a quiz. |

|Review/Summary: |Complete the graphic organizer. |

|Application--Extended Classroom|Have students interview their parents and ask them if they know what their credit score is and what they do |

|Activity: |to make sure it stays positive. |

|Application--FFA Activity: |Encourage your students to join the Agriculture Sales or Marketing CDE. |

|Application--SAE Activity: |Have your students determine if obtaining credit (loans etc.) is ever a good thing to use in their own SAE’s.|

|Evaluation: |Ask students to go to the computer lab and test their knowledge of credit scores, by going to the following |

| |website: |

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| |score |

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| |Grade the student worksheets and graphic organizers. |

|Evaluation Answer Key: |The computer gives students the correct answers as they complete the quiz. |

Ignorance is not Bliss When it Comes to Knowing Credit Score

By Sandra Block

USA TODAY

AS SEEN IN USA TODAY SEPTEMBER 28, 2004.

From Alabama comes reassuring news that Chucky, the 1,000-pound zoo alligator who escaped during Hurricane Ivan, has been captured. That means you can stop worrying about finding a giant reptile in your bathtub and move on to other concerns. Here's a good place to start: your credit score.

Your credit score influences everything from the interest rate on your mortgage to your car insurance premiums, yet many Americans don't worry enough about their scores. A recent survey by found that only 10% of Americans know their score. Another survey released last week by the Consumer Federation of America found that many consumers harbor some dangerous misconception about their scores.

The knowledge vacuum is troubling, consumer advocates say.

"The cost of not knowing your score and its significance could be not only denial of credit, but also difficulty obtaining needed services and even a job," Stephen Brobeck, executive director of the CFA, said last week.

Credit scores are compiled by the three major credit agencies, Experian, Equifax and TransUnion, based on information provided by creditors. Most scores are based on a formula developed by Fair Isaac, a research firm. They're designed to measure the likelihood you'll repay a loan, based on your record of repaying debts in the past. Some common fallacies about credit scores include:

Your credit score is like your golf score: the lower, the better.

Actually, a high score indicates a borrower is a low risk; a low score signals trouble. If your score is below 600, you can expect to pay above average interest rates on a loan, if you can get one at all.

Borrowers with scores above 700 usually qualify for relatively low rates. If your score is above 760, you probably qualify for the lowest rates.

You can improve your credit score by marrying well.

Married couples don't get a combined credit score, so you can't improve your number by marrying someone with a 780.

"When you get married, you're not mixing your credit history," says David Chung, interim president of CreditXpert, which sells credit-management products.

However, lenders will look at both scores if you apply jointly for a loan, such as a home mortgage, says John Danaher, president of , a subsidiary of TransUnion.

Earning more money will improve your score.

The amount of money you make doesn't affect your credit score. Your score is based entirely on your history of repaying your debts, Chung says. If you're behind on your bills, your score will suffer, no matter how much you earn.

"I could be a multimillionaire, but if I don't pay my bills, the bank doesn't care," Chung says. "They didn't get their money — that's all they care about."

Your occupation, age and employment history don't affect your credit score, either. However, individual lenders may consider those factors, along with your credit score, when deciding whether to give you a loan.

There's little you can do to improve your score.

Actually, there's a lot you can do, although it may take time.

About 40% of consumers surveyed by the CFA didn't realize they could raise their scores by paying off a large balance on a credit card. A disturbing 28% mistakenly believed they could improve their score by maxing out on their credit cards.

Most credit scoring calculations look at the amount of your outstanding debt compared with your credit limits. Borrowers who have maxed out on their credit cards are considered riskier because they may have trouble making payments. The formula rewards borrowers "who are using credit but using it responsibly," Danaher says.

Paying your bills on time will also go a long way toward improving your credit score. Your score is adjusted as new information comes in.

If you pay your bills on time, your score could improve in as little as three months, Danaher says.

You can get your credit score for free. Sadly, that's not true. A federal law enacted last year will allow consumers to get a free copy of their credit reports once a year. The rollout will start in December on the West Coast, expanding to cover all parts of the country by September 2005. But unless you're applying for a home mortgage, you'll still have to pay to get your score.

All three credit reporting agencies will sell you a copy of your credit report and score. You can purchase all three reports and scores from Fair Isaac, , for $38.85.

To test your knowledge of credit scores, go to score.ved.

NET GAIN — SCORING POINTS FOR YOUR FINANCIAL FUTURE

NET GAIN — SCORING POINTS FOR YOUR FINANCIAL FUTURE

Problems and Solutions

1. What is the purpose of a credit score? ________________________________________________________________________________________________________________________________________________________________________________________________

2. Why has this measure been chosen to describe the habits of consumers? ________________________________________________________________________________________________________________________________________________________________________________________________

3. Why is marital status irrelevant in the calculation of a credit score? ________________________________________________________________________________________________________________________________________________________________________________________________

4. Why would people think that by maxing out a credit card, they would receive a better credit score? ________________________________________________________________________________________________________________________________________________________________________________________________

5. Do you believe that you can maintain a good credit score? ________________________________________________________________________________________________________________________________________________________________________________________________

6. What are three ways you could get a low credit score as you go off to college or work after you graduate? ________________________________________________________________________________________________________________________________________________________________________________________________

7. What strategy will use to maintain a good credit score? ________________________________________________________________________________________________________________________________________________________________________________________________

Graphic Organizer Activity Name ___________________________

Date_____________________________

Directions – Review the information below; then complete the organizer.

The following chart shows what makes up your credit score and to what percent it affects the overall makeup of your score.

|Payment History |This number keeps track of whether you have been making your payments on time. |

|(35% of Score) | |

|Amounts Owed |How much you owe and to whom you owe it. |

|(30% of Score) | |

|Length of Credit History |A longer, positive history will increase your score. |

|(15% of Score) | |

|New Credit |Opening several new accounts or having many inquiries into your credit history in a short period of time will |

|(10% of Score) |affect your chances of qualifying for credit. |

|Types of Credit Used |If you have a lot of lenders who are classified as “D” or subprime (i.e., they loan money at high interest |

|(10% of Score) |rates to consumers with bad or no credit), you may be placed in a high-risk category, even if your payment |

| |history is perfect. |

Credit Score Graphic Organizer:

Decide whether each of the following characteristics is indicative of a person with a high or a low credit score. Then, list each trait in the appropriate box.

Characteristics of credit history:

← Pays bills 30 days late.

← Pays bills on time.

← Creditors charge this consumer the lowest rates.

← Has been denied credit.

← Has maxed out his credit line on all of his credit cards.

← Pays off debt.

← Frequently opens new credit card accounts.

← Does not make loan payments on time.

← Makes loan payments on time.

← Cell phone company feels very comfortable selling their services to this person.

|Person 1 — credit score of 700 |Person 2 — credit score of 500 |

|1. ____________________________________ |1. ____________________________________ |

|2. ____________________________________ |2. ____________________________________ |

|3. ____________________________________ |3. ____________________________________ |

|4. ____________________________________ |4. ____________________________________ |

|5. ____________________________________ |5. ____________________________________ |

| |NET GAIN — SCORING POINTS FOR YOUR FINANCIAL |

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