1. October 25, 2011 Objective: Students will examine the concept of creditworthiness.

2. Check for Understanding Get out a piece of paper and place your name at the top, then answer the following questions: ▫Write one (or more) thins that you already know about creditworthiness (your credit reputation). ▫Write one question you still have about yesterday’s discussion (either APR or Check Cashing) SAVE! You will have more writing at the end of class.

3. Are you Creditworthy? The last few weeks we have been discussing credit and it’s two definitions (your reputation and a debt owed). Over the next few days we are going to talk about how a bank determines if you are creditworthy (will they lend you money) What are some things you think they would be interested in knowing?

4. Credit Score Your credit score is a measure of factors that may affect your ability to repay credit. It’s a complex formula that takes into account how you’ve repaid previous loans, any outstanding debt, and your current salary. A credit score is dynamic and can change positively or negatively depending upon how much debt you accrue and how you manage your bills. The factors that determine your credit score are called The Three C’s of Credit - Character, Capital and Capacity.

5. C #1 - Character Character: From your credit history, a lender may decide whether you possess the honesty and reliability to repay a debt. Considerations may include: ▫Have you used credit before? ▫Do you pay your bills on time? ▫How long have you lived at your present address? ▫How long have you been at your present job?

6. C #2 - Capital Capital: A lender will want to know if you have valuable assets such as real estate, personal property, investments, or savings with which to repay debt if income is unavailable. Capital will include security and if there is something the bank can use as collateral on a loan.

7. C #3 - Capacity Capacity: This refers to your ability to repay the debt. The lender will look to see if you have been working regularly in an occupation that is likely to provide enough income to support your credit use. The following questions may help the lender determine this: ▫What is your current salary? ▫How many other loan payments do you have? ▫What are your current living expenses? ▫What are your current debts? ▫How many dependents do you have?

8. Check for Understand (Part II) Now on the piece of paper from the beginning of class write: ▫One thing I learned today is… ▫One thing I am not sure about today’s lesson is… ▫I can use this again when I… Place your papers in the gray basket on your way out of class.