ANSWER KEY: CREDIT HISTORY

Part 1: Angela just started college, and has been provided with a number of credit card offers. She applies for and is granted two credit cards. However, Angela doesn't realize what is necessary for responsible credit management. She starts out with a credit score of 750. See what happens to her score when she mismanages her credit. Why does each of the actions below affect her credit score?

Action: Score Impact: Why does her action affect her score?
Angela enjoys going to concerts, buying clothes, and going out to eat. She runs up the balance on her two new credit cards almost to their limits. -80 Credit reporting agencies look at the total amount owed and the amount owed of a person's available credit. Running up her cards almost to their limits will lower Angela's score.
Angela is very busy with college and a part-time job. Without realizing it, she misses monthly payments on both cards. -100 Angela's payment history is a big part of her credit score. Late payments hurt her score.
Angela continues to spend as she needs textbooks for the second semester. With this expense, she spends to the limit of one of the two cards. -80 Running up her cards to their limits will increase the amount Angela owes and lower her score. The credit card company may raise Angela's credit limit, but Angela should not spend more money than she can afford to repay.
Angela decides she needs to earn more money to pay off her credit cards, but needs to drive to get to her new job. She takes out a loan to buy a new car. -20 A car loan is a new credit account. Every time a new account (like a credit card or loan) is opened, Angela's score will drop slightly.
Busy with school and the new job, Angela misses a loan payment on her new car. -75 Late payments negatively affect Angela's credit score.

Starting Score: 750. Angela's New Credit Score: ___395____


Part 2: Angela realizes that she hasn't acted as responsibly as she could have with her credit cards. What can she do now to improve her credit score? Use the Credit Score Student Organizer to find follow-up actions for Angela, and compute how much impact each one will improve her score.

Action: Score Impact: Follow-up Action: Score Impact:
Angela enjoys going to concerts, buying clothes, and going out to eat. She runs up the balance on her two new credit cards almost to their limits. -80 Pay off accounts. +80
Angela is very busy with college and a part-time job. Without realizing it, she misses monthly payments on both cards. -100 Build history of paying on time. +40
Angela continues to spend as she needs textbooks for the second semester. With this expense, she spends to the limit of one of the two cards. -80 Pay down credit balance. +40
Angela decides she needs to earn more money to pay off her credit cards, but needs to drive to get to her new job. She takes out a loan to buy a new car. -20 Six months of on-time payments. +30
Busy with school and the new job, Angela misses a loan payment on her new car. -75 Pay all overdue payments and keep loan current. +20

Angela's New Credit Score with Follow-up Actions: __605___