Life lessons students can bank on

  A local banker raised the interest rate to the old adage "A penny saved is a penny earned" when he explained to high school students how being penny-wise toward credit could earn dividends over a lifetime.

  Jeffrey Byrd, assistant vice president and commercial banker with Mohave State Bank, returned for a third year to Yuma High School for a series of financial literacy lectures on the importance of establishing and keeping a good credit record for life.

  "From one Criminal to another, I'm trying to help you avoid the mistakes I made in my 20s," Byrd said. "Your credit score is an invisible person who follows you from now until you're put in the ground."

  Byrd, a 1982 graduate of Yuma High, returned to Tamara Kay's business ownership class to lecture about the importance of paying their bills on time.

  Kay, whose class requires students to write a business plan over the school year, said students get a clear understanding from Byrd and wished she had access to his lecture when she was in high school. 

  The credit score, also known as FICO, a measure of credit risk, was developed by the Fair Isaac Corp. founded in 1956 and is tracked by three credit report agencies: Equifax, Experian, and Trans Union, he said.

  One of the best ways to establish credit is to get a credit card, and Byrd targets seniors because high school graduates are the prime age group solicited by card issuers, he said.

  But while a credit card can help obtain a college, car or mortgage loans, students need to use common sense. Typically two credit cards should be sufficient, one for every day use and one for emergencies, also because not every merchant will accept the same card.

  Credit scores range from  300 to 850, with a score over 700 being good but below 600 having potential trouble, he noted. The score is comprised of five elements, with 35 percent based on credit history and 30 percent on how much someone owes.

  "When you come into my office for a loan, the first thing I'll do is pull a credit report because that will tell me about your character, if you tell the truth, your obligations and whether you're a risk to give a loan to," Byrd said.

  If a credit report shows a history of paying bills on time, it indicates a person is a worthy risk, he noted. Even delinquent payments on something like video rentals could sabotage a person's credit application in the future, he cautioned.

  An illustration on the chalkboard brought the point into sharper focus. An average home in Yuma costs about $200,000, Byrd said. With a credit score of over 720, the interest payment will be 6.046 percent or $1,205 per month. A score of 560 to 620 will require 9.982 percent interest rates, or $1,752 per month.

  Over the course of a 30-year mortgage, the person with a better credit score will pay for that house $233,808 in interest for a total of $433,808 but the person with poor credit will pay $430,894 in interest for a total of $630,894.

  Not only do lenders check credit but increasingly employers as well, Byrd cautioned. Given the choice between two equally experienced applicants, the one with the better credit record is likely to get hired.

  Another precaution is not disclosing vital information online.

  "If someone gets your Social Security number and opens a credit card account - what can I do about it as a banker? Nothing. You must go to the credit card company to clear you name. Bankruptcy can take seven to 10 years to rebuild you life."

   Manuel Magallames, 17, said Byrd's lecture gave him the foresight of what to expect in the future and the different ways credit can be measured.

  "I don't think I'll have a credit card for a while but I keep my checking account balanced with the help of my parents. I think credit problems are caused by overspending on things you don't need. Gas is getting expensive but a lot of young people make modifications to their car that can be even more expensive."

---
William Roller can be reached at
wroller@yumasun.com or 539-6858.