Credit Scores and Credit Reports

The number that sets your interest rate.

12 problems · about 20 minutes · TEKS M.M.4.C

What this lesson teaches

The student explains what affects a credit score and how it changes borrowing costs.

A credit score summarises repayment reliability and sets the rate you are offered.
Payment history matters most, then how much of your credit you use.
A low score can cost thousands of dollars on a single loan.

Straightforward practice. Get the method working first.

5 problems

$600 balance on a $3000 limit. Utilisation in percent?
Answer 20
Why 20%.
Which factor affects a credit score most?
Answer Payment history.
Why Payment history carries the most weight.
$300 balance on a $1500 limit. Utilisation in percent?
Answer 20
Why 300 ÷ 1500.
$900 balance on a $1000 limit. Utilisation in percent?
Answer 90
Why 900 ÷ 1000.
$400 a month against $460 over 60 months. Total difference in dollars?
Answer 3600
Why 60 × 60.

The same ideas with more to keep track of.

3 problems

Which factor matters most? 1 payment history, 2 account mix.
Answer 1
Why Whether you repaid on time.
Does checking your own credit report cost money? 1 yes, 0 no.
Answer 0
Why It is free.
Does a score recover as fast as it falls? 1 yes, 0 no.
Answer 0
Why Recovery takes months.

Mixed problems. Work out what kind of question it is before you start.

4 problems

Which actions help a credit score?
Answer Paying every bill on time; Keeping balances low against limits
Why Two of these are exactly what lenders read as risk.
$250 balance on a $2500 limit. Utilisation in percent?
Answer 10
Why 250 ÷ 2500.
The Difference: $380 a month against $450 a month over 60 months. Total difference in dollars?
Answer 4200 dollars
Why $4200.
The Utilisation: A $500 balance on a $2000 limit. What is the utilisation, in percent?
Answer 25 %
Why 25%.