Overview
In the Taking Control of Your Credit Video Field Trip DVD, Julian and her friend learn that misusing credit cards – or any type of credit – causes serious consequences. This lesson in- forms students about the harmful effects of misusing credit cards, ways to deal with credit card problems, and the importance of a good credit rating. As part of this lesson, students analyze realistic credit reports to make credit decisions. In this lesson, students develop communica- tion and critical thinking skills through classroom, group, and personal activities.
Procedures
1.
Watch the Taking Control of Your Credit Video Field Trip DVD (at least chapter 4).2.
Ask students for their reactions to the DVD. Encourage any responses without trying to initially steer the direction of the discussion.3.
Review the vocabulary as appropriate throughout the lesson to ensure students clearly understand the concepts being discussed.4.
While credit can be an appropriate method of payment, its abuse can lead to significant negative consequences. Ask students why people abuse credit, using it unwisely or exces- sively. Write their responses on the board. Emphasize the connection between using credit to immediately satisfy wants, failing to consider all the costs associated with credit, and the likelihood of abusing credit. Reinforce the importance of using cost-benefit analysis to make wise spending decisions and use credit appropriately.5.
Ask students for possible negative consequences associated with using credit unwisely or excessively. Write their responses on the board. Use the What Bad Credit Can Do toYou sheet to guide this discussion. Ask students to consider what factors affect the severity
of these consequences. For example, factors may include the amount of debt incurred, the length of time credit payments are overdue, and the frequency of credit problems.
6.
Since abusing credit can lead to severe consequences, controlling credit use is important. Ask students how to effectively manage and monitor credit use to avoid its harmful misuse. Write their ideas on the board.7.
The most common tool to monitor credit use is the credit report. Discuss what a credit re- port is and how businesses and other organizations use it to review and evaluate a person’s credit history. Use the Sample Credit Report to demonstrate the types of information included in a credit report. A credit report provides personal identifying information, employment infor- mation, credit information, public record information, a list of credit report inquiries, and pos- sibly other related information. Generally information up to seven years old is reported.8.
Discuss how credit reporting agencies evaluate a person’s credit history and assign a credit score to represent that person’s credit worthiness. The score is a numerical ranking of the person’s credit rating. The score is frequently used as an important factor in determining whether to grant credit to someone. For example, a bank may only offer credit to individuals with a credit score above a certain threshold, or individuals in different ranges of scores may face different interest rates. Use the 5 C’s of Credit Scoring sheet to review how credit worthi- ness is evaluated and credit scores are determined.9.
Discuss who has the right to review a person’s credit report. Emphasize that a person’s credit history is protected by the law. According to the Fair Credit Reporting Act (FCRA), only businesses with a “legitimate business need” and a “permissible purpose” can obtain a per- son’s credit report. In addition, only those with written permission from a person can access that person’s credit report. Any organization that receives a copy of one’s credit report must be listed under the Inquiries section of the credit report. Other important legislation addressing consumer rights include the Equal Credit Opportunity Act, Fair Credit Billing Act, and Truth inLending Act. Information about these laws can be found at http://www.ftc.gov/bcp/menus/con-
sumer/credit.shtm.
10.
Emphasize the importance of periodically reviewing one’s own credit report to make sure your credit history is being reported accurately and to monitor credit activity associated with your name. Reviewing one’s credit report can reduce the consequence of credit fraud, like identity theft, by catching inappropriate activities sooner. Use the Requesting My Credit Re-port sheet to review how to order a copy of one’s credit report.
11.
As an in-class exercise to engage students in active learning, use Exercise 5.1 Evaluat-ing Credit Reports. In this activity, groups of students role play as decision makers who must
evaluate a person’s credit report as the deciding factor in a decision. This exercise gives students practical experience examining realistic credit reports and using critical thinking and communication skills to make cooperative decisions.
12.
As an optional exercise, have students discuss the importance of reviewing credit reports with their families. Exercise 5.2 My Family’s Credit Report provides an outline for students to follow. Due to the personal nature of this exercise, it is recommended that nothing be collected to avoid revealing any information about the credit history of a student’s family. This exercise teaches students how to request, read, and analyze a credit report at a personal level, as well as engage and educate parents.13.
In addition to monitoring credit activity, consumers must wisely manage credit use. If someone is already in trouble with credit, taking action to correct the problems is important. Ask students for ways someone can get out of credit trouble. Write their responses on the board. Use the Fixing Credit Card Problems sheet to discuss useful strategies to deal with credit card problems and retake control of credit card usage.Assessment
Teacher observation of classroom participation Teacher observation of group activities
Additional Resources
http://www.careprogram.us
http://careprogram.squarespace.com/free-care-downloads/
Consumer Credit and Counseling Service
(http://www.cccsintl.org)
http://www.creditorweb.com/articles/categories/credit-card-education.html
Financial Fitness for Life
National Council on Economic Education, 2005