Teacher Lesson Plans

Beginning/Low-Intermediate Level
Unit 2: Planning for the Future

LESSON TWO: Credit

Objectives | Materials | Activities | Web Links | Related In-class/Online Lesson: The True Cost of Credit Cards

Lesson 2 Objectives

Learn basic vocabulary and concepts related to credit.
Identify different ways to establish credit.
Identify credit behaviors that categorize a person as a high or low credit risk.
Practice phone conversations.
Language and/or EFF skills practiced: listen actively; solve problems and make decisions; read with understanding.

Lesson 2 Materials

Overhead 2-A: Bad Credit - No Loan! Picture Story

Worksheet 2-2: Bad Credit! No Loan Picture Story and Activities
Worksheet 2-3: You Decide: Low or High Credit Risk
Worksheet 2-4: Asking Your Landlord for a Letter of Support

Lesson 2 Activities

Print All Lesson Materials

Activity 2-1: What is credit?

To warm-up to the topic of credit, draw a picture of a credit card on the board, or use realia - one of your own. Ask some leading questions like:

Who in the class has a credit card?
Is it a "debit" and/or "credit" card? Ask if anyone knows what is the difference - make sure students understand the difference. To further describe the difference you can say that a debit card says "take the money from my bank account now". A credit card says "I promise to pay when I get my credit card bill."

debit card - amount purchased is taken immediately from your bank account
credit card - amount purchased is paid on next monthly bill

Where do you get a credit card? (banks, stores, offers in the mail)
How do you get a credit card?
Can anyone get a credit card? Why? Why not?
Are credit cards good? Why?
Are credit cards bad? Why?

Also ask the question, is it important to pay your bills on time? Why?
Answers may differ, but be sure students understand that paying bills on time helps you earn a good credit record. With a good credit record, it is easier to get a loan for a car, or a house (mortgage).
You don't need to go into much detail, just try to draw attention to the topic.

Activity 2-2: Bad Credit - No Loan! Picture Story
Overhead 2-A: Bad Credit - No Loan! Picture Story
Worksheet 2-2: Bad Credit! No Loan Picture Story and Activities

Following the instructions for Picture Story Best Practices, generate a story and complete related picture story activities.

Bad Credit - No Loan!

Bad Credit - No Loan!

Ali has many bills to pay. He can not pay his credit card bill for $1,250. He is frustrated. He throws his bills in the trash.

Ali's wife is pregnant. They see a house they want to buy. They meet with a loan officer at the bank. They show him a picture of the house. The loan officer says, "You don't pay your bills on time. Your credit is bad. No loan for you!"

Ali needs good credit. He cuts up his credit cards. He organizes his bills. He saves money. He starts to pay his bills on time.

Ali calls his landlord. He says, "Please write a letter that says I pay my rent on time every month." His landlord says, "Okay, no problem."

The next year, Ali, his wife and little boy meet the loan officer. The loan officer says, "Your credit is good. We can give you a loan.".

Ali and his family buy a new house. They have another baby. They are very happy.

Sequence Key:

Activity 2-3: Good Customer = Low Credit Risk
Worksheet 2-3: You Decide: Low or High Credit Risk

Please note that this activity may not be appropriate for your beginner level students. If not, skip to activity 2-4.
Explain that banks and other lenders loan money to people who they believe will pay back the money, and pay it on time.
Show the picture story again and explain that like Ali, if someone does not have good credit (they don't pay bills on time) banks may not want to loan them money.
Explain the concept of "risk". Loan officers assign each person a level of risk, high risk=difficult to get loan; medium risk=may be difficult to get loan; low risk=easy to get loan.
For your information, students can qualify for a loan in several ways (see list below) - not just via credit card/bill payment history. These non-traditional ways to qualify may be appropriate for students who do not have/want a credit card or have never received a loan. This information may be difficult to explain to students at this level, but you can encourage students to talk to a loan officer (in their own language) about alternative ways to qualify for a loan (like Ali who got a letter from his landlord). You may want to invite a loan officer to your class, or visit a local bank.
- Non-traditional ways to qualify for a loan:
  - provide credit card history--make purchases and pay money on time
  - provide loan history--you have received a loan that you paid back/pay back on a regular basis
  - provide non-traditional documentation--you provide documents that show you are a trustworthy person who pays bills on time

work documents--W2 or letter from boss demonstrating stable work history

rent documents--copies of cashed checks or letter from landlord demonstrating that you pay your rent on time

utility company documents--monthly statements or cashed checks showing you pay your bills on time

letters from personal acquaintances--a letter from a family member or another person who loaned you money and you paid back on time

Pass out the Worksheet 2-3 You Decide: Low or High Credit Risk, and in groups of 3 to 5 students, have students decide about credit risk.

Answers: 1) high 2) low 3) high. For number 3, explain that Luigi is a high risk because of the past loan. He will need to resolve this situation before he can get a good credit rating.
As a wrap up of the activity do one or both of the following activities:
- share with students overheads from Pages 13-15 of the practicalmoneyskills.com Credit lesson http://www.practicalmoneyskills.com/spanish/pdf/teachers/specialneeds/lev_3/lesson_07/complete.pdf. This provides a good explanation of what creditors look for from applicants, explained by the three C's: character, capital, and capacity. If the vocabulary here is too difficult for your students, introduce the new vocabulary, or just use the information to help you to explain more about how to establish good credit in general.
- Brainstorm steps to having good credit/repairing bad credit.

Activity 2-4: Getting a Letter from the Landlord - Phone Conversation
Worksheet 2-4: Asking Your Landlord for a Letter of Support

Again, refer to the picture story where the character calls the landlord for a letter. Explain that a landlord can write a letter saying you pay your rent on time every month. This information can help get a loan.
Say that you are going to practice a phone conversation like Ali's in the story. Read aloud the phone conversation to the class and ask students to listen. Then pass out the conversation, and have students follow along. Read it again, and ask students to repeat chorally. Call on individual students to repeat certain phrases. Practice any phrases that seem difficult.
In pairs, sitting almost back to back (to simulate a phone conversation where you can't see the other person's face), have students practice the dialogue. Pairs can volunteer to do the dialogue in front of the class.
For homework, or as an additional activity, have students cut up the dialogue (sentence by sentence, not word by word), then put the conversation back in order. Review the correct order, and practice the dialogue again.

Activity 2-5: What to Do When You Can't Pay

Tell students to remember these two things for maintaining a good credit rating, rephrased from the credit lesson on practicalmoneyskills.com.
- Cut expenses and think about what you can really pay each month.
- Contact your creditors immediately to let them know you can't pay. Ask them to explain a plan for paying the debt.
Then, write this information on the board for students to copy. It is for those with credit/debt problems who need advice and counseling (there is a fee for most services). Companies and agencies that are not members of the organizations below may not be legitimate and may take advantage of customers.
- The National Foundation for Consumer Credit & DebtAdvice.org http://www.debtadvice.org/index.html or 800-388-2227 (800-682-9832 in Spanish) to find the nearest office; or
- the Association of Independent Consumer Credit Counseling Agencies http://www.aiccca.org or 800-450-1794.
You may let students know how to get a free credit report by passing on the information in the Equifax listing in the Web Links section below.

Final Activity: Reflection

Web Links

Bank of America and most commercial banks offer secured credit cards. Here is an example of one secured credit card offer http://www.bankofamerica.com/creditcards/?context_id=marketing_detail&offer_id=ecomm090xfeq00400800121983en001.

Equifax http://www.equifax.com offers free credit reports as do Experian http://www.experian.com and TransUnion http://www.transunion.com/. If students would like to see a sample credit report print out page 17 of the practicalmoneyskill.com Credit lesson http://www.practicalmoneyskills.com/spanish/pdf/teachers/specialneeds/lev_3/lesson_07/complete.pdf.

FDIC - Money Smart - An Adult Education Program http://www.fdic.gov/consumers/consumer/moneysmart/mscbi/mscbi.html (click on "Enter Money Smart CBI Online")
This is an amazing online resource for most of the topics covered in this curriculum. The online multi-media and interactive modules require a free registration/log-in. In the first module, students can "go inside" a bank and click on the employees to hear what they do. If using this site in class, students would need to log in, and then view the entire module - you can't go to a specific point within a module to cover a specific subtopic. Because of this, the site may be a good activity to assign for outside of class once you teach students how to log in. The modules are also available in Spanish. The related module, called "Borrowing Basics " covers these topics:

Federal Trade Commission warns of the dangers of secured credit cards and other marketing scams. http://www.ftc.gov/bcp/conline/pubs/credit/secured.shtm. Encourage students to go to legitimate sources for credit and loans.

Practical Money Skills for Life http://www.practicalmoneyskills.com/english/index.php This is a free Web site designed to help educators, parents and students practice better money management. The following link covers the topic of credit. It can help teachers explain the concept to students http://www.practicalmoneyskills.com/english/at_home/consumers/credit/. The language level on this site is too high for beginner and low-intermediate level students. However, all the content on the site is available in Spanish and Chinese. This link in Spanish covers the topic of credit cards. http://www.vidaydinero.com/spanish/at_home/consumers/credit/. The following link discusses the three C's--character, capital, and capacity. The list as written may be too difficult for this level, but it will help you to explain more about how to establish good credit http://www.practicalmoneyskills.com/english/at_home/consumers/credit/reports/3c.php.