Credit: lesson plans
How scores are built, and how to protect yours. 13 lessons, about 45 minutes each, in the order students should take them.
- 1
How do credit scores work?
A credit score, usually 300 to 850, sums up your credit reports, and paying on time and low utilization matter most.
Students will be able to
- Payment history is 35% of a FICO score.
- Utilization is balances divided by limits.
- Checking your own credit does not hurt it.
45-minute plan
- Warm-up (5 min): is this true? "Checking my own credit score will lower it."
- Read the lesson together (10 min)
- Work the example on the worksheet (10 min)
- Practice questions (10 min)
- Exit task (10 min): Go to AnnualCreditReport.com and pull your report from one of the three bureaus. Check every account and every late payment. Then write down each card's balance and limit and work out your utilization, overall and card by card.
- 2
What is a good credit score?
A FICO score of 670 or higher is generally good; 740 is very good and 800 or more is exceptional.
Students will be able to
- Good starts at 670 on FICO.
- You have many scores, not one.
- A better range lowers your borrowing cost.
45-minute plan
- Warm-up (5 min): is this true? "Anything under 800 is a bad credit score."
- Read the lesson together (10 min)
- Work the example on the worksheet (10 min)
- Practice questions (10 min)
- Exit task (10 min): Find a free score in your card or bank app and write down the number and which range it falls in. Then set autopay for at least the minimum on every card and loan so no payment is ever late.
Worksheet and answer keyOpen the lessonLoan payment calculator
- 3
How do you check your credit report for errors?
Pull all three free reports, check every account and late payment, and dispute errors with the bureau and the lender.
Students will be able to
- Your reports are free from the official site.
- Dispute with the bureau and the lender.
- Most negative items fall off after 7 years.
45-minute plan
- Warm-up (5 min): is this true? "My credit report is probably fine, so I don't need to check it."
- Read the lesson together (10 min)
- Work the example on the worksheet (10 min)
- Practice questions (10 min)
- Exit task (10 min): Go to AnnualCreditReport.com and pull your report from one bureau. Check your name, addresses, every account and every inquiry. Circle anything you don't recognize and set a reminder to pull the other two.
- 4
What is credit utilization and how do you lower it?
Utilization is card balances divided by limits. Pay before the statement closes to lower the balance that gets reported.
Students will be able to
- Utilization is balances divided by limits.
- Each card is counted on its own too.
- The statement balance is usually what gets reported.
45-minute plan
- Warm-up (5 min): is this true? "I pay my card in full every month, so my utilization is zero."
- Read the lesson together (10 min)
- Work the example on the worksheet (10 min)
- Practice questions (10 min)
- Exit task (10 min): Open each card's latest statement and write down the closing date, balance and limit. Divide each balance by its limit, then set a calendar reminder to pay 3 days before the next closing date.
- 5
What's the difference between a hard and soft credit check?
Hard checks come from applying for credit and can cost a few points; soft checks never affect your score.
Students will be able to
- Applying for credit is a hard check.
- Checking your own credit is always soft.
- Rate shopping counts as one inquiry.
45-minute plan
- Warm-up (5 min): is this true? "Getting quotes from several car lenders will wreck my credit score."
- Read the lesson together (10 min)
- Work the example on the worksheet (10 min)
- Practice questions (10 min)
- Exit task (10 min): Pull your free credit reports and read the inquiries section on each. Write down any hard inquiry you don't recognize and dispute it with that bureau. If you aren't applying for anything soon, freeze your credit at all three.
Worksheet and answer keyOpen the lessonLoan payment calculator
- 6
How do you build credit from nothing?
Open one account that reports to the bureaus, put a small bill on it, pay in full, and wait about 6 months.
Students will be able to
- You need an account that reports to bureaus.
- A FICO score generally needs 6 months.
- Pay in full and you pay no interest.
45-minute plan
- Warm-up (5 min): is this true? "You have to carry a balance on your credit card to build credit."
- Read the lesson together (10 min)
- Work the example on the worksheet (10 min)
- Practice questions (10 min)
- Exit task (10 min): Call your bank or a local credit union and ask if it offers a secured card or credit-builder loan that reports to all three bureaus. Write down the fees and the minimum deposit.
- 7
How does a secured credit card work?
You put down a deposit, usually equal to your limit, then use and repay the card to build credit.
Students will be able to
- Your deposit usually sets your limit.
- Pay in full and it costs nothing.
- It only builds credit if it reports.
45-minute plan
- Warm-up (5 min): is this true? "A secured card is just a debit card, so it can't help my credit."
- Read the lesson together (10 min)
- Work the example on the worksheet (10 min)
- Practice questions (10 min)
- Exit task (10 min): Compare two or three secured cards from your bank, a credit union or another issuer. Check the annual fee, the APR and whether they report to all three bureaus. Pick the one with no annual fee and full reporting.
Worksheet and answer keyOpen the lessonCredit card payoff calculator
- 8
Does being an authorized user build credit?
Usually yes. A well-run card's history can show on your report, but late payments and high balances can follow you too.
Students will be able to
- You usually don't owe the bill.
- The card's whole history can show up.
- Their mistakes can become your problem.
45-minute plan
- Warm-up (5 min): is this true? "If I'm an authorized user, I'm on the hook for the whole balance."
- Read the lesson together (10 min)
- Work the example on the worksheet (10 min)
- Practice questions (10 min)
- Exit task (10 min): If you have little or no credit, ask one person you trust whether they have an old card with on-time payments and a low balance. If they agree, have them call the issuer, ask whether it reports authorized users, and add you.
- 9
How to improve your credit score
Pay every bill on time, cut card balances below 30% of your limits, fix errors, and limit new applications.
Students will be able to
- Payment history is the biggest factor.
- Card balances are the fastest lever.
- Checking your own score never hurts it.
45-minute plan
- Warm-up (5 min): is this true? "I need to carry a balance on my card to build my score."
- Read the lesson together (10 min)
- Work the example on the worksheet (10 min)
- Practice questions (10 min)
- Exit task (10 min): Turn on autopay for the minimum payment on every card and loan you have. Then look up each card's statement closing date and set a reminder to pay it down 3 days before.
Worksheet and answer keyOpen the lessonCredit card payoff calculator
- 10
How long do negative items stay on your credit report?
Most negative items stay 7 years and bankruptcy up to 10. Errors can come off sooner, for free, by dispute.
Students will be able to
- Most negative items last seven years.
- The clock starts when you first fell behind.
- Accurate items can't be removed early.
45-minute plan
- Warm-up (5 min): is this true? "If I pay off a collection, it disappears from my credit report."
- Read the lesson together (10 min)
- Work the example on the worksheet (10 min)
- Practice questions (10 min)
- Exit task (10 min): Get your free reports at AnnualCreditReport.com, where you can check free weekly from each of the three bureaus at AnnualCreditReport.com. List every negative item with its amount and its date of first delinquency. Dispute anything wrong, any paid or under-$500 medical collection, and anything past its date.
- 11
Should you close a credit card you don't use?
Keep old no-fee cards open. Close a card when its fee or temptation costs more than the small, often temporary score dip.
Students will be able to
- Closing a card can raise your utilization.
- A closed card's history doesn't vanish.
- An annual fee is a fair reason.
45-minute plan
- Warm-up (5 min): is this true? "Closing cards I don't use will raise my credit score."
- Read the lesson together (10 min)
- Work the example on the worksheet (10 min)
- Practice questions (10 min)
- Exit task (10 min): List your cards with each one's limit, balance and annual fee. For any card you want to close, work out your utilization without its limit, and call the issuer to ask about a no-fee version.
- 12
Are credit card rewards worth it?
Only if you pay in full every month. Interest on a carried balance usually costs more than the rewards earn.
Students will be able to
- Interest beats rewards almost every time.
- A flat cash back card is the baseline.
- Rewards can change or disappear.
45-minute plan
- Warm-up (5 min): is this true? "I'm earning 2% back, so I'm coming out ahead even if I carry a balance."
- Read the lesson together (10 min)
- Work the example on the worksheet (10 min)
- Practice questions (10 min)
- Exit task (10 min): Open your card account and check last statement's interest charge. If it's above $0, switch your focus to paying the balance off. If it's $0, set autopay to the full statement balance and redeem any rewards sitting there.
Worksheet and answer keyOpen the lessonCredit card payoff calculator
- 13
How do you freeze your credit, and should you?
A credit freeze blocks new lenders from seeing your report, so thieves can't open accounts in your name, and it is free.
Students will be able to
- A freeze is free at all three bureaus.
- A freeze does not hurt your score.
- Lifting a freeze takes 1 hour or less.
45-minute plan
- Warm-up (5 min): is this true? "Freezing my credit will hurt my score or cost me money."
- Read the lesson together (10 min)
- Work the example on the worksheet (10 min)
- Practice questions (10 min)
- Exit task (10 min): Set aside 30 minutes. Place a freeze at Equifax, Experian and TransUnion through their official sites, and save each login or PIN in one safe place with the bureau's name next to it.
Unit vocabulary
Free to print, copy and share for non-commercial classroom use. General education, not personalized financial, tax or legal advice. Figures are examples. Check current rates and limits before you act.