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Lesson 5
Lesson 5
Lesson 5
Lesson 5
Lesson 5
Lesson 5
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Lesson 5

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  • 1. F I N A N C I A L C R E D I T H A N D O U T WHY USE CREDIT? TM People who borrow money use either short-term or long-term credit. • Long-term credit is a loan you use to finance a very large purchase such as a home or car. • Short-term credit – from a credit card – is also a loan and must be repaid. A credit card can be useful. You can use a credit card to buy something immediately when you don’t have the money. You can use credit to track your purchases or to buy things over the Internet. But credit cards can also be dangerous, because they send a simple message: “Spend money.” And they let you keep spending even when you don’t have the money to pay back what you owe. CREDIT FACTS You will soon receive many credit card offers. But you need to be careful using credit: • According to a Federal lending agency, the average college student has three credit cards and owes $2,700 in credit card debt (in addition to student loans). A quarter of students owe more than $3,000. And 10% of students owe more than $7,000. • Every credit card you apply for is automatically added to your individual credit report. Too much credit card debt can make it difficult to buy a home or car. GOOD AND BAD USES OF CREDIT Credit cards have a number of good uses: • They can provide identification (to rent a car or cash a check). • They can be a safe substitute for cash. • They provide easy record-keeping of your purchases. • They usually come with insurance in case you or are unhappy with what you bought. But, credit cards can also be bad: • They provide a constant temptation to spend. • They have very high interest rates (if you can’t pay the full bill each month). • They can allow you to accumulate a lot of debt very quickly. HOW SHOULD YOU USE CREDIT? You will probably have at least one credit card before too long. How should you use it? Create a few credit rules for yourself. Can you pledge to pay your bill in full each month? Or buy only things that are part of your budget? How can you get the benefit of credit without the risks?
  • 2. F I N A N C I A L C R E D I T R E P O R T S TM WHAT IS A CREDIT REPORT? Do you have a credit report? What does it say about you? You may not know this, but you may already have a credit report. If you have a credit card or if you’ve ever borrowed money (from someone other than your family, that is) you already have a credit report… and keeping it positive will make a big difference in how you are able to live your life. A credit report is simply a collection of facts about you that tells lenders whether you’re a good risk to lend money to. A credit report has two basic components: • Information about your credit history: that is, every loan and credit card you’ve applied for or received (including the amount you received, how much you owe each month, whether or not you’ve made your payments on time, and whether other lenders have asked to see your credit report); and • Your three-digit FICO score: the FICO score (short for Fair Isaac Company, the firm that invented the score) tells lenders in a single number how good a credit risk you are. The FICO score can be between 300 and 850. Here’s what different scores say about you: o > 750: Excellent credit risk o 720 – 750: Very good credit risk o 660 – 720 : Acceptable credit risk o 620 – 660: Uncertain credit risk o < 620: Risky Three companies publish credit reports: Equifax, TransUnion, and Experian. You can (and should) regularly review your credit report to learn what it says about you and to correct any mistakes. WHAT DOES YOUR CREDIT REPORT MEAN FOR YOU? Your credit report may not sound like much… but it can affect many different areas of your life. If you want to buy a car or a home, for instance, your credit report will determine whether a bank or other lender will be willing to loan you money. It will also determine what interest rate you get. If your credit score is above 720, you will generally be able to get a lower interest rate, which will save you money every month while you are repaying the loan. The same is true with credit cards. People with bad credit reports generally have more trouble getting credit and have to pay a higher interest rate when they do get it.
  • 3. CREDIT REPORTS, Continued Sometimes your credit report might have incorrect information, or may show a mistaken picture of you because of identity theft. If that’s the case, you should take steps immediately to get your credit report repaired. A bad credit report can cost you, so it makes sense to keep it good. HOW CAN YOU KEEP YOUR CREDIT REPORT GOOD? Even if you already have a credit report, it’s probably fairly new. That means that now is a good time to make sure you understand how to keep your credit report strong. Here are a few tips: • Check your credit report regularly and promptly report any incorrect information or identity theft problems. • Don’t hold or apply for too many credit cards (more than one or two). Lenders may be concerned about someone who has many credit cards and therefore a greater temptation to spend money. Even applying for a new card will show up on your credit report, so don’t apply for new cards just to get a free gift or promotion. • Pay all your bills on time: car payments, mortgage or rent payments, credit cards, and student loans. If you have entered into an agreement to pay a bill, be sure you pay it on time, and always try to pay it in full. Your bill- paying history will become part of your credit report and will affect your credit score. • Don’t run up large balances you can’t repay on your credit cards. Lenders will be concerned if they see you haven’t been able to pay off your credit cards. • Do apply for some credit to get your credit history started. Lenders will also be concerned if you don’t have any credit history… so it’s a good idea to apply for a small line of credit or a single credit card and then prove that you can use it wisely.
  • 4. FINANCIAL PLAN/BUDGET WORKSHEET – GR 12 TM Name: ________________________ Grade: _________ Advisor: ______________________ The purpose of the Financial Plan is to help you and your family prepare for the training and education you will be pursuing after high school. Directions: • Complete the information below to determine your personal financial plan for your chosen post-secondary option. Use the chart in the Postsecondary Cost Comparisons Handout to get started calculating costs and potential income • Use the Internet (individual postsecondary institution web sites or the College Board site) to get more detail if you wish. Career Cluster: Career of Interest: Top Choice Postsecondary Plan: Estimate the yearly expenses for your postsecondary program of choice (if applicable): Educational Costs Tuition & Fees Books & Supplies TOTAL Living Costs Room & Board Transportation (come up with a reasonable estimate) Personal Expenses (come up with a reasonable estimate) TOTAL Total Expenses (Educational Costs + Living Costs): What is (or will be) your available income? Savings Summer Earnings Full- or part-time work during school year Apprenticeship earnings What resources will your family provide? From their current income From savings Miscellaneous Available Funds (Total all 7 lines above): FINANCIAL NEED (Total Expenses minus Available Funds): Use th e sp a ce b elo w t o writ e so me id ea s a bo ut ho w you mig ht g o a bo ut f ind in g a dd it ion a l f ina n cia l a id t o su pp o rt yo u r ed u ca t ion a l g oa ls.
  • 5. POST-SECONDARY COST COMPARISONS Expenses Use the charts below to determine the average cost of your chosen post-secondary option. Tuition and Room & Type of College Total Fees Board 4-year Public $5,689 $13,033 4-year Private $21,190 $32,827 2-year Public $2,091 $6,558 2-year Private $12,100 $20,362 Apprenticeship SOURCE: U.S. Department of Education, National Center for Education Statistics, 2000–01 through 2007–08 ROOM & COLLEGE TUITION* BOOKS** TOTAL*** BOARD Clark College $3,175 $1,100 N/A $4,275 Lower Columbia College $3,177 $1,100 N/A $4,277 Mt. Hood Community College $3,153 $1,100 N/A $4,253 Portland Community College $3,838 $1,100 N/A $4,938 Central Washington University $17,247 $1,100 $9,774 $28,121 Eastern Washington University $6,363 $1,100 $7,897 $15,360 Western Washington University $5,613 $1,100 $8,625 $15,338 University of Washington $7,692 $1,100 $8,949 $17,741 Washington State University (Pullman) $8,488 $1,100 $9,330 $18,918 Washington State University (Vancouver) $8,488 $1,100 N/A $9,588 University of Portland (4-year Private) $32,496 $1,100 $10,500 $44,096 Pacific Lutheran University (4-year Private) $28,100 $1,100 $8,150 $37,350 University of Puget Sound (4-year Private) $35,800 $1,100 $9,190 $46,090 SOURCE: Clark College *Tuition is based on a full academic year (15 credits per term) not including summer term **The cost of books is averaged. ***Additional fees may be included in total cost of attendance, please see colleges’ individual websites for full cost. To use the specific fees for your college in the development of your budget, go to the following website and find out college tuition, fees, room, and board for any college in the United States: http://cgi.money.cnn.com/tools/collegecost/collegecost.jsp Revenue To calculate the revenue you plan to receive from full- or part-time employment, go to the Bureau of Labor Statistics website and determine what the average wage of your career is: http://www.bls.gov/oes/2008/may/oes_nat.htm#b27-0000

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