BETTER MONEY HABITS HIGH SCHOOL LESSON:
DOES CARRYING A BALANCE ON YOUR CREDIT CARD HURT
YOUR CREDIT SCORE?
LESSON 6 -- BUILDING GOOD CREDIT SCORES
LESSON DESCRIPTION AND BACKGROUND
This lesson uses the Better Money Habit video Does Carrying a Balance on Your Credit Card
Hurt Your Credit Score? (www.bettermoneyhabits.com) to help students understand how
revolving accounts, such as credit cards, can impact credit scores. The lesson explains the
differences between revolving and installment accounts, and discusses the importance of
having a balance of both types of credit to build a good credit score. The lesson is designed to
be used as an extension to Lesson 11 and/or Lesson 13 in Financial Fitness for Life, Grades
9-12 because the two lessons combined focus on different types of loans and various
elements of a credit score.
It is recommended that the video be shown after using both lessons to ensure students have a
more complete understanding of revolving credit as well as credit reports. This video is 2:12 in
length, and this activity can be completed in 10 minutes.
FINANCIAL FITNESS FOR LIFE CONNECTION, Grades 9-12
Lesson 11: What is Credit?
Lesson 13: Applying for Credit
BETTER MONEY HABITS VIDEO
Credit: Keeping Credit Healthy: Does Carrying a Balance on Your Credit Card Hurt Your Credit
Score? (2:12)
ECONOMIC AND PERSONAL FINANCE CONCEPTS
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Credit
Credit score
Revolving accounts
Installment accounts
Consumer credit
BETTER MONEY HABITS: HIGH SCHOOL
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BETTER MONEY HABITS HIGH SCHOOL LESSON:
DOES CARRYING A BALANCE ON YOUR CREDIT CARD HURT
YOUR CREDIT SCORE?
NATIONAL STANDARDS FOR FINANCIAL LITERACY
Standard 4. Using Credit, Benchmark 12
5. Lenders make credit decisions based in part on consumer payment history. Credit bureaus
record borrowers’ credit and payment histories and provide that information to lenders in credit
reports.
OBJECTIVES
At the end of this lesson, the student will be able to:
 Explain the differences between revolving accounts and installment accounts.
 Give an example of revolving accounts and installment accounts.
 Identify two ways revolving debt can have a negative impact on credit scores.
TIME REQUIRED
10 minutes (extension of lessons above)
MATERIALS
Handout 6.1: Credit Scores
Note Cards
PROCEDURE
1.
2.
3.
4.
Provide each student a copy of Handout 6.1 to use as guided notes while watching the
video.
Introduce students to the video by reminding them that their balance and number of credit
cards influence their ability to build a healthy credit score; this video will help them avoid
some of the potential pitfalls of using credit.
Show the video and have students complete Handout 6.1 while watching the video.
Debrief the video by discussing their answers to Handout 6.1.
CLOSURE
To summarize this lesson, discuss the basic definition of revolving credit and the importance of
maintaining a good credit score.
BETTER MONEY HABITS: HIGH SCHOOL
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BETTER MONEY HABITS HIGH SCHOOL LESSON:
DOES CARRYING A BALANCE ON YOUR CREDIT CARD HURT
YOUR CREDIT SCORE?
ASSESSMENT
Provide each student with a note card. Have them use it as an “exit ticket” before leaving
class by writing either a sentence, bullet points, or paragraph giving two ways that revolving
credit can hurt their credit score.
EXTENSION
Watch the Better Money Habits video “The True Cost of Paying Only the Minimum Payment on
Your Credit Card” (5:13 minutes) where students are shown on a spreadsheet how paying just
a few extra dollars per month can make a big difference in how much they will spend on credit
over time. This video provides greater in-depth information about making minimum payments
on credit cards.
BETTER MONEY HABITS: HIGH SCHOOL
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BETTER MONEY HABITS HIGH SCHOOL LESSON:
DOES CARRYING A BALANCE ON YOUR CREDIT CARD HURT
YOUR CREDIT SCORE?
HANDOUT 6.1 – CREDIT SCORES
GUIDED NOTES:
DOES CARRYING A BALANCE ON YOUR CREDIT CARD
HURT YOUR CREDIT SCORE?
Better Money Habits (www.bettermoneyhabits.com)
1. Revolving accounts are ______________ of credit that can be used as needed up to a
_____________________________.
2. An example of a revolving account is a _________________.
3. Installment loans are taken out all at __________ and then paid back on
a _________________.
4. An example of an installment account is a ____________________
5. List two ways revolving debt can have a negative impact on credit scores:
(1) more than _________ of your available credit limit
(2) having a bunch of ______________ cards
6. List the two best things that can help your credit score:
(1) pay your bills ____ ___________
(2) pay ________ __________ the minimum monthly payments.
BETTER MONEY HABITS: HIGH SCHOOL
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BETTER MONEY HABITS HIGH SCHOOL LESSON:
DOES CARRYING A BALANCE ON YOUR CREDIT CARD HURT
YOUR CREDIT SCORE?
HANDOUT 6.1 ANSWERS
1. Revolving accounts are open lines of credit that can be used as needed up to a certain
limit.
2. An example of a revolving account is a credit card.
3. Installment loans are taken out all at once and then paid back on a fixed schedule.
4. An example of an installment account is a mortgage.
5. List two ways revolving debt can have a negative impact on credit scores:
(1) more than 30% of your available credit limit
(2) having a bunch of inactive cards (high, unused revolving credit limits)
6. List the two best things that can help your credit score:
(1) pay your bills on time
(2) pay more than the minimum monthly payments
BETTER MONEY HABITS: HIGH SCHOOL
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