Financial LiteracyIn May, a stringent new financial literacy law took effect in Oklahoma. It requires all high school students to pass a class on personal finance before they can graduate. Banking, taxes, investing, loans, insurance and identity theft, among other subjects, will be part of the curriculum, and the teachers will have to certify that their students comprehend them all.

Given the woefully high levels of financial illiteracy in America, making such a course standard and required in high schools might sound like a fine idea. There’s just one big risk: Those teachers could lead their students astray.

Increasing the depth at which American high schools teach personal finance — going further than simple budgeting, balancing a checkbook, compound interest and the like — opens several cans of worms. How qualified are the teachers? How will school districts fund these new courses? How are they adding these subjects to crowded curriculums?

Classes in budgeting, credit cards, compound interest and other basic personal finance skills can help prepare our children for adulthood. The problem stems from overzealous mandates. Our children — and far too often, our teachers — aren’t in a position to handle more than a cursory examination of financial topics.

The Dangers of Unqualified Teachers Teaching Financial Literacy

School districts need to certify teachers in a specific financial discipline much as they would for a math or history teacher. Or school districts should contract outside professionals.

“Teachers feel unqualified to teach financial literacy,” says Julie Heath, director of the Economics Center and economics professor in at the University of Cincinnati. “Eighty-two percent say they are not prepared to teach these concepts, even as over 90 percent of them think they need to be taught in schools.”

“Schools and districts shouldn’t place any teacher in a position to teach subject matter he or she feels unqualified to teach,” says Heath. “Shrinking budgets mean that teachers often do not get the professional development that would make them more confident to teach financial literacy.”

How well qualified to teach financial literacy, for example, is a teacher with with $50,000 in credit card debt?

“To be a teacher or a leader, you must lead and teach by example. We cannot expect someone who is in disarray with their own finances to be placed in a position of teaching someone, regardless of age, about their finances,” says Michael Minter, managing partner of Mintco Financial in Tampa, Fla. “This may be the ultimate root to a [more] serious problem in our country, the financial literacy [or lack there of] among parents and teachers.”

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boost your creditMany young people don’t realize their credit score has a big impact on their ability to rent a home or apartment. Most landlords pull credit reports before agreeing to sign a lease, and a less than desirable FICO score can severely limit your chances of getting into a decent apartment at all, let alone at a reasonable price.

Insurance companies, too, often charge higher insurance premiums to applicants with poor credit scores.

But do you have to let your negative credit score affect you in this way? Can you rebuild your credit history solely as a renter? Can paying your rent on time help you to rebuild your credit? These are hidden problems renters face. The answers might surprise you.

“So many people pay rent, 100 million every month, yet there isn’t a comprehensive solution,” says Bill Butler, a founder of Rental Kharma. “The average renter in the United States is not building their credit by being a responsible renter.”

Collection agencies help landlords add dings to your credit report — non-payments or late payments. But most landlords don’t report their tenants’ good payment histories to credit bureaus, so the Fair Isaac Corp. (FICO) doesn’t include rent payments in its current calculations for its primary score.

“The current FICO score does not take into account rental payments as part of the scoring algorithm,” says Anthony A. Sprauve, senior consumer credit specialist for myFICO.com and Fair Isaac. “This is because these kinds of payments are not consistently reported to the credit bureaus to provide enough data to be statistically predictive of a person’s future likelihood of repaying a debt.”

Fair Isaac does include rent payments — when available — in an expansion score for consumers with a limited credit histories. [click to continue…]

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