What Is the Difference Between a Credit Report and a Credit Score and Why Are They Important?

Grade: 12 Lesson # 9

What is the difference between a credit report and a credit score and why are they important?

SS.912.FL.4.5 Explain that lenders make credit decisions based in part on consumer payment history. Credit bureaus record borrowers’ credit and payment histories and provide that information to lenders in credit reports.

Correlated Literacy Standards:

LAFS.1112.RH.3.7

Integrate and evaluate multiple sources of information presented in diverse formats and media (e.g. visually, quantitatively, as well as in words.)

LAFS. 1112.WSHT.1.2

Write informative/explanatory texts, including the narration of historical events, scientific procedures/experiments, or technical processes.

SS.912.FL.4.5 Explain that lenders make credit decisions based in part on consumer payment history. Credit bureaus record borrowers’ credit and payment histories and provide that information to lenders in credit reports.

Credit Reports and Credit Scores

Lesson Number 9:

Correlated Florida Standards (See Full Text on Cover Page)

·  LAFS.1112.RH.3.7

·  LAFS. 1112.WSHT.1.2

Essential Questions

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

·  What determines my credit score?

·  What is in my credit report?

Learning Goals/Objectives

·  Explain the differences between credit scores and credit reports.

·  Identity the three credit reporting agencies.

·  List the five components of a credit score.

·  Compute the debt to credit ratio.

Overview

·  This lesson, adapted from the Council of Economic Education’s EconEdLink, explains the difference between credit reports and credit scores and helps students understand how a credit score is generated and why it is important to their financial success.

Materials

·  Handout .1: Credit Reports and Credit Scores

·  Handout .1: Answers

·  Handout .2: Why a Credit History Is Important

·  Poster board or large construction paper and markers

·  Projector and whiteboard or screen

·  Computer and internet access

Time

·  50 minutes

Activity Sequence

INTRODUCTION/HOOK

·  Tell students to imagine they are applying for a job or a scholarship at the local university. Ask them to name some of the qualities potential employers or scholarship committees would use to evaluate them. Put the list on the board and discuss the answers, asking students to explain why they are important to consider.

·  Tell students to imagine they are applying for a loan to buy a car or for a college education. Ask them to name some of the qualities potential lenders would use to evaluate them as a borrower. Put that list on the board and compare it with the first list.

·  Encourage students to discuss the importance of having good character, whether applying for a loan or applying for a job or scholarship. Remind them that people use various ways to determine what type of person we are, and many of those decisions are made by people who do not know us personally. (5 minutes)

ACTIVITY

1.  Introduce the video, Better Money Habits (https://www.bettermoneyhabits.com/credit/what-is-a-credit-score/difference-credit-report-credit-score.html)

2.  Tell students this video will help explain credit scores and credit reports, two important parts of their credit history. Distribute copies ofHandout 7.1for students to complete while watching the video. (2 minutes)

3.  Show the video.(3 minutes)

4.  After watching the video, review the student answers toHandout 7.1and answer any questions students may have. (5 minutes)You may want to collectHandout 7.1or allow them to use it as a guide to answer questions onHandout 7.2.

5.  Put students in small groups. Distribute copies ofHandout 7.2. Tell students they are going to discuss what they learned in the video by answering the questions onHandout 7.2. (5 minutes)

6.  After they have completedHandout 7.2, have each group prepare a poster with information about credit scores and credit reports to hang up in the classroom. (20 minutes)

CLOSURE

·  Have students share the information included on their posters and discuss any additional questions they have about the importance of a good credit history. (10 minutes)

OPTIONAL EXTENSION SUGGESTION/HOME LEARNING

·  Students can complete Ever-Fi Unit 4: Credit Scores, if teacher has registered class.

·  Students may also visit www.annualcreditreport.com to view Credit Report on one of credit bureaus (Experian, Equifax or TransUnion)

Sources/Bibliographic Information that contributed to this lesson:

Adapted from EconEdLink Lesson, “Credit Reports and Credit Scores

http://www.econedlink.org/teacher-lesson/1273

Video:

https://www.bettermoneyhabits.com/credit/what-is-a-credit-score/difference-credit-report-credit-score.html

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