EC Algebra Worksheet

Lenders primarily use the Fair Isaac Corporation (FICO) model to determine credit scores. FICO grades consumers on a 300- to 850-point range; a higher score indicates less risk to the lender. A score of 800 or higher is considered exceptional; 740 to 799 is very good; 670 to 739 is good; 580 to 669 is fair; and 579 or lower is poora) Using the loan rate available to someone with a FICO credit score of 780, calculate the monthly payment and total paid over the life of a $250,000 30-year fixed-rate mortgage for someone with this credit score.

b) Now, calculate the monthly payment and total paid using the loan rate available to someone with a FICO credit score of 640.

c) Calculate the difference in monthly payment for someone with a very good credit rating (780) with someone who has a low credit rating (640).

d) Find the total amount of interest paid for someone with a very good credit rating (780) ANDfor someone who has a low credit rating (640).

e) How much more interest will someone with a 640 credit score pay than someone with a 780?

f) Write a few sentences stating and explaining at least two ways to improve a credit score.

g) Write a few sentences stating and explaining at least two ways to hurt your credit score.

Module 4
Write up Problem
Math for Everyday Life
Lenders primarily use the Fair Isaac Corporation (FICO) model to determine credit scores. FICO grades
consumers on a 300- to 850-point range; a higher score indicates less risk to the lender. A score of 800
or higher is considered exceptional; 740 to 799 is very good; 670 to 739 is good; 580 to 669 is fair; and
579 or lower is poor.
According to MyFICO.com your credit score can impact interest rates available to you as follows:
FICO score
760–850
700–759
680–699
660–679
640–659
620–639
APR
2.85%
4.125%
4.35%
4.52%
4.85%
5.85%
a) Using the loan rate available to someone with a FICO credit score of 780, calculate the monthly
payment and total paid over the life of a $250,000 30-year fixed-rate mortgage for someone with this
credit score.
b) Now, calculate the monthly payment and total paid using the loan rate available to someone with a
FICO credit score of 640.
c) Calculate the difference in monthly payment for someone with a very good credit rating (780) with
someone who has a low credit rating (640).
d) Find the total amount of interest paid for someone with a very good credit rating (780) AND for
someone who has a low credit rating (640).
e) How much more interest will someone with a 640 credit score pay than someone with a 780?
f) Write a few sentences stating and explaining at least two ways to improve a credit score.
g) Write a few sentences stating and explaining at least two ways to hurt your credit score.
**Remember to show all your steps and work when working through a formula. Describe /
explain what you are doing in each step. For a strong write-up submission show and explain
your work. Write all your answers in full sentences after calculating the values.**