When it comes to financial literacy, the earlier in life someone starts to understand money and credit, oftentimes the more successful they’ll be later on in life. However, a recent survey indicates the vast majority of American high schoolers don’t think they have the proper understanding of their finances.
The survey, conducted by EverFi, found on average 83 percent of current high schoolers would like financial literacy courses taught in their schools. However, just four states mandate such courses.
“Many high school students have little, if any, personal experience in managing their own finances, yet they are just moments away from entering adulthood, opening lines of credit and making financial decisions that will impact their individual futures and our entire global economy,” said EverFi chief executive officer Tom Davidson.
The trend of sending students into adulthood without proper financial knowledge is cyclical and has the potential to cripple the wherewithal of future generations, Davidson added.
Where do high schoolers miss the mark?
The survey found that one of the major financial areas high schoolers fail to comprehend comes to credit scores. Specifically, the average respondent believes a “good” credit score is one that is around 500. Meanwhile, roughly one-third of high schoolers think a credit score of 300 is strong.
According to Experian, the average American’s credit score falls between 600 and 750, while a score greater than 700 indicates strong credit management.
What determines a credit score?
No matter their age, before a consumer starts to take their credit score into consideration and look for credit help, it’s a good idea to understand what makes up a credit score.
According to myFICO, the majority of a credit score – roughly 35 percent – is made up by a borrower’s credit history. This includes their ability to make monthly account payments on time and in full. Missing this deadline by a single day can negate numerous months of responsible payment habits, so it’s a good idea to create a strict payment schedule and stick to it.
Another major determinant of a credit score is the amount a borrower’s owes across all accounts. This factors makes up another 30 percent of an overall score, but in addition to credit cards, includes auto loans, students debt and mortgages.
Meanwhile, the remaining 35 percent is split between the length of a borrower’s credit history, the types of credit used as well as inquiries into opening new lines of credit.