Introduction to FICO Score / Credit Score for Kids and Teens
This video explains the concept of credit score in a simple, concise way for kids and beginners. It could be used by kids & teens to learn about FICO score, or used as a money & personal finance resource by parents and teachers as part of a Financial Literacy course or K-12 curriculum.
Suitable for students from grade levels:
- Elementary School
- Middle School
- High School
The topics covered are:
- What is Credit Score
- How is it calculated
- Why is it important
- What is a good FICO score
- How to improve your credit score
What is Credit Score?
A credit score is a number that indicates your creditworthiness.
The most commonly used type of credit score is a FICO Score, which was developed by the Fair Isaac Corporation. It gives you a score between 300 and 850.
Who determines my credit score?
The three credit bureaus – Equifax, Experian, and TransUnion – usually calculate your credit score.
How is a credit score calculated?
Your credit score is calculated based on the information contained in your credit report, like whether you make the payments on time, how much of the available credit limit you are using, etc.
Each credit bureau has a slightly different formula to calculate credit scores, so your credit scores from different credit bureaus can vary a little.
Why is credit score important?
Your credit score can decide whether you get the loan or not, and at what rate. A good credit score gives the lender confidence that you would pay them back on time, and therefore helps you get credit cards and loans at a lower rate.
What is considered a good credit score?
Generally speaking, a credit score of 700 or more is considered good, and a credit score of 800 or more is considered excellent.
The average credit score in the United States is in the high 600’s (update: the average rose to 710 in 2020).
Can I do anything to increase my credit score?
It’s definitely possible to improve your credit score, and I’m glad you want to.
But how that’s done is a topic for another time…