Most personal finance instructors educate their high school students about credit ratings.
Most pupils are unfamiliar with them and may dispute the topic’s relevance. As educators, we understand how critical it is to address this issue BEFORE children begin to borrow and establish a credit history.
To get students interested in credit scores, we created a two-part inquiry-based exercise (FICO Credit Scores AND Impact of Credit Score on Loans) that walks them through a four-step process:
- If you believe your kids may need a refresher, here’s a three-minute video that explains the distinctions between credit reports and credit scores.
- Students are asked to estimate three credit scores based on detailed credit profiles.
- After that, students utilize a credit score simulator to see how accurate their second-step estimations were.
- Students then use their credit ratings to calculate how much each of the three people would pay for a loan to buy their ideal mini-Cooper automobile. The pupils are asked to compute the cost of poor credit at the end of the course.
This game was utilized during a recent session at Castilleja School in Palo Alto. The following are some of the students’ key takeaways:
- “It’s fantastic to have a head start on developing credit.”
- “For a high credit score, pay your payments on time.”
- “It’s critical to have a good credit score.”
The themes presented in these activities are as follows:
- Payment history, credit limit, and other factors influence a credit score.
- The significance of making on-time payments to maintain a good credit score
- What happens if you don’t have credit and are considered “credit invisible”?
- What role does a credit score have in the interest rate you pay on loan? (auto loan)
- Your credit score influences the cost of a vehicle loan or a mortgage.
What Happens to Your Credit Score After Bankruptcy?
After bankruptcy, your credit score can plummet according to BankruptcyHQ. So, carefully consider your credit rating before you file for bankruptcy. Bankruptcy will have a devastating impact on your credit health. The exact effects will vary. But according to top scoring model FICO, filing for bankruptcy can send a good credit score of 700 or above plummeting by at least 200 points. If your score is a bit lower—around 680—you can lose between 130 and 150 points.
That said, people with good to exceptional credit scores will see the most notable impact of bankruptcy. If your credit score is already fair or poor—below 670—you may not see large point drops. Yet, the result will still be a very low credit score. You simply don’t have as many points to lose to fall to that very poor rating.