Answer to Question #304267 in Finance for Kelsey Jand

Question

Danielle Debtfree is also a college junior. She has always been very cautious with money and thinks her friends with credit cards are crazy. She pays only with cash and debit cards, and while she knows she can handle credit cards given her frugal ways, she doesn’t want to ask her parents to sign off on a credit card for her, as she doesn’t turn 21 for a few more months.

For each of Danielle’s actions, mark whether you think that factor improves (+) or decreases (--) her credit score.

1) She currently has no credit cards

2) She has no loans outstanding

Questions:

1. What do you think Danielle’s credit score is (from a range of 300-850)?

2. Now, go to the myFICO Credit Score Estimator and use Danielle’s information to complete it. What is Danielle’s estimated credit score?

3. What does Danielle’s score say about her creditworthiness?

4. As her credit counselor, what recommendations would you make to Danielle to improve her credit score?

Answer 1

1) She currently has no credit cards:+, -

2) She has no loans outstanding:+,-

On the one hand, the credit rating is good, as it does not take loans. on the other hand, bad, because there were no loans yet and the bank does not know if Daniel is disciplined,“credit invisible,”

1. Danielle’s credit score is 300, “credit invisible”.

2. Danielle’s credit score is 300, “credit invisible”.

3.There is no data on creditworthiness, the bank may assume that it is low, as it does not repay loans

4.Probably, you need to think about your credit history, since soon adulthood and loans will have to be taken