This is a good hands-on activity that students can complete to see how various inputs impact their credit score.  We all have seen the pie chart that lists the main factors that determine your credit score.

How about letting students see how real-life actions and behaviors will impact their scores.  Putting them in the role of “Credit Counselor” will make this topic more engaging to them.  So here’s the situation:

You have been assigned to be the credit counselor to both Sam and Jenna (see cases below).  You have access to this great tool:  the FICO Score Simulator which allows you to analyze their situations and come up with their credit score.

Run each of these profiles through the simulator:

• Sam Spendthrift is a college junior.  He couldn’t wait until he turned 21, so he could apply for a few credit cards.  Here are some details about his profile:
  • He currently has 3 credit cards (Question #1)
  • He got his first credit card less than 3 months ago (#1)
  • He got his first student loan 3 years ago (#2)
  • He has applied for 5 credit cards in the last year (and had 3 applications accepted). (#3)
  • He has opened a new credit card within the last three months (#4)
  • All of his 3 credit cards currently has a balance, as he has had trouble paying off his card each month (#5)
  • He has $4,000 currently outstanding on all his credit cards (#6)
  • He missed a payment in the last three months when he forgot to notify the card company that he had recently moved out of his apartment.  He is 30 days behind on making a payment (#7).
  • He has two cards currently past due and owes $3,000 combined on those two cards (#8).
  • His credit card balances of $4,000 are about 80% of his overall limits of $5,000 (#9).
  • He has never gone through a bankruptcy or other proceeding (#10).

Jenna Debtfree is also a college junior.  She has always been very cautious with money and thinks her friends with credit cards are “nuts.”  She pays only with cash and debit cards and while she knows she can handle credit cards given her frugal ways, she doesn’t want to ask her parents for sign her up as an authorized user for her card as she doesn’t turn 21 for a few more months.

• She currently has no credit cards (Question #1)
• She has no loans outstanding (Question #2)

Activity Questions:

• What are Sam and Jenna’s estimated credit scores?
• What do their scores say about their creditworthiness?
• As his credit counselor, what recommendations would you make to each of them to improve their credit scores?

Now go through the simulator again, with your current situation.  What did you discover about your estimated credit score?

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.