Gettington is all about giving you options and helping you get the most out of your shopping experience with us. An important part of that experience is understanding how credit works and making the smartest possible choices when you make your purchases. That’s why we’ve created this information guide, with topics ranging from budgeting to credit, plus handy tips and tools, a glossary of terms, and much more. We’ve also included a section on how to read your Gettington statement. With this valuable information in hand, you can rest easy knowing that your choices are sound and your purchases are credit smart.
Creating a budget
- Gather all sources of information that detail income and expenses. If the exact amounts are not available, make estimates.
- Break down the expenses into those that stay the same (mortgage or rent, etc.) and those that vary month to month (food, gasoline, phone, etc.)
- On a monthly basis, total your income (use your take-home amount) and expenses.
- Verify that income is greater than expenses. If not, make adjustments and reduce unnecessary expenses.
Maintaining a budget
- Keep accurate records and monitor income and expenses on a regular basis.
- Set realistic goals and make adjustments gradually to achieve budget objectives.
- Track your monthly results so you’re working toward financial health over the course of the year.
Benefits of a budget: short & long-term
- A budget focuses you on your financial status and guides you toward needed changes.
- A budget shows you exactly where expenses may be too high.
- A budget lets you build up your savings and be prepared for emergencies.
- A budget provides a sense of financial awareness and control.
Set targets: time and amount
- Set realistic savings goals: a sound strategy is to save 10% of your income, with 5% set aside toward short-term needs and 5% for long-term goals.
- Determine a short-term savings amount for a desired item. Reward yourself with the purchase and use any extra to establish your next goal.
Develop a safety fund
- Save during good economic times so you’re ready if an emergency happens.
- Build your safety fund up to the equivalent of 3-6 months of take-home income.
Review goals periodically and adjust as needed
- Circumstances change unexpectedly. Be ready to make revisions.
- Are you able to maintain your savings levels? Are you saving for new goals? Do you anticipate changes in income or expenses? Ask these questions every so often and make the necessary adjustments.
Benefits of good credit
- Good credit is earned through a history of timely payments and low balances.
- Good credit status may lead to special credit privileges: special pricing on promotional items, lower APR (Annual Percentage Rate), higher credit limits, and deferred billing.
- A credit score is based on a mathematical formula that projects how consistent you will be in making payments on a loan.
- The higher your credit score, the more reliable the lender expects you will be.
- A high credit score may also give you lower interest rates and expanded credit limits.
- You can improve your credit score by reducing credit debt, not applying for credit too frequently, and correcting mistakes on your credit report.
- Debt-to-income ratio is calculated by dividing all your debt payments by gross income (excluding mortgage or rent payments).
- The recommended debt-to-income ratio is 15 percent or lower. A ratio of 20 percent or higher is a signal that your spending is too high.
- Calculate the ratio monthly. If you’re paid every other week, your monthly gross income is one paycheck times 2.17. Add dividends, interest received, alimony, and estimated amounts for bonus, commission, or tips.
- For debt calculations, include minimum payments on all credit purchases (except mortgage or rent) and loans.
Credit reports and agencies
- A credit report is a collection of information related to your credit history.
- There are three major credit reporting agencies who sell the information to lenders, as they are evaluating loan and credit card applications and rates.
- Consumers can request free copies of their credit reports annually from each of the three major agencies. Call 1-877-322-8228 or go online to www.annualcreditreport.com.
- Timely payments result in several advantages for the consumer.
- Advantages include a successful credit history, potential for increases in credit limit, avoidance of penalty fees for late payments, and more favorable interest rates.
More than minimum payments
- Paying more than the minimum payment is a worthwhile practice.
- You maintain a strong credit history, pay off the balance sooner, and ultimately pay less for the purchase with less interest costs.
Problems making payments
- If making a payment at all or on time may be a problem, getting in touch with your lender is essential. If you’re having trouble with your Gettington payments, notify us to see if we can arrange a mutually satisfactory solution.
- Don’t simply ignore making your payment. That can lead to late fees, a reduced credit limit, and an unfavorable credit history.
Higher credit scores
- You can improve your credit score by maintaining a good credit history, lowering your debt, minimizing credit applications, and correcting errors.
Monitoring credit reports
- Check your credit score at least once a year. Free credit reports are available annually from each of the three major credit report agencies.
- Work with lenders and the reporting agency to correct any errors and raise your score.
Number of credit accounts
- Establish only the number of credit accounts you can successfully manage. Having too many accounts may limit your ability to make timely payments on all of them, and that can hurt your credit history and score.
What are the different types of credit?
- There are three different types of credit: revolving credit, charge credit, and installment credit.
- Revolving credit occurs when a consumer borrows from a lender and pays the loan back in full or partial payments at a set time. Examples are Visa and Master Card.
- With charge credit, a lender expects the consumer to pay back the loan in full on the monthly due date. An example would be American Express.
- A mortgage is an example of installment credit. The consumer agrees to pay back the loan in established amounts over a predetermined period of time.
How do I establish credit?
- There are various ways to establish credit.
- Apply for a credit card, make a purchase, and then pay off the balance as quickly as possible to establish a good credit record.
- Another option is to apply for a secured credit loan, using the value of some possession as guaranty in case of default. That reduces the risk for the lender.
- An alternative is to have a person with a proven credit history co-sign as a borrower on a loan. When the loan is paid off in a timely manner, that will be part of the credit history for both parties.
What is a credit bureau?
- A credit bureau collects information regarding: identification, employment, credit history, and any public records and data.
What is a good credit score?
- Credit scores range from 350-850; however, there is no industry standard on what is a "good score." Lenders judge credit scores differently and also consider other factors in determining loan worthiness. Typically, though, a score above 690 is considered very good and a score below 620 is rated as "sub prime," meaning the consumer may not get the loan or may have stricter conditions applied to the loan.
How do I obtain my credit reports?
- Contact one or all of the three major credit bureaus to get your report. Each bureau interprets credit information differently, so your score may vary. Consumers are entitled to one free report annually via annualcreditreport.com or directly from the agencies: Experian 1-888-397-3742 or Trans Union 1-800-916-8800 or www.transunion.com or Equifax 1-800-685-1111 or www.equifax.com
How do I improve my credit score?
- You can improve your credit score by managing the number of credit accounts, so that you can pay them off in full and on time.
- You should also obtain your credit score from one or all three agencies at least annually to verify that all the information is accurate.
What information do the credit bureaus collect?
- The credit bureaus obtain information regarding your identity, credit history, employment background, and any public records.
How can I affect my Annual Percentage Rate?
- You can keep your rate on loans as low as possible by maintaining a solid credit record of paying off loans in full and on time. Your credit history indicates future potential for payment of the loan. The better your history, the more favorable your rate.
How can I increase my line of credit?
- Like the APR, your line of credit is based on your credit history. A strong record of complying with the terms of past loans will typically result in a high credit limit. If you want your limit increased, and your history is satisfactory, send your request directly to the lender.
How to read your bill
Where to get help
- Amortization The allocation of a lump sum payment to different time periods, especially for loans, including finance charges. An amortization schedule is a table listing each payment and the balance due after that payment is made.
- Annual Percentage Rate The APR is the interest rate for an entire year rather than a single month. It is one method used to compare costs of a loan.
- Budgeting plan As part of a budget, the consumer may set up automated payments each month through a credit or debit card or by automatic withdrawals on a checking or savings account. The consumer can schedule the specific date for the payment and the amount to be paid (minimum due, fixed amount, or entire balance).
- Available credit As part of the credit approval, a credit limit is established. Subtracting the amount of the credit already used leaves the available credit.
- Average daily balance The average daily balance is the amount on an account over a period of time. It is calculated by adding daily balances for a period and dividing by the number of days in that period. It may be used as a method to determine finance charges.
- Bankruptcy Bankruptcy is a legal process in which a person declares that his financial liabilities exceed his assets, and he is insolvent. There are different types of bankruptcy proceedings, and a person considering bankruptcy should seek legal counsel.
- Credit history A person’s credit history is a record of loans received and payment on those loans. Potential lenders will examine a consumer’s credit history to determine the likelihood of a future loan being paid in full and on time.
- Credit report A credit report contains a person’s identification information, employment history credit history, credit score, and information from public records.
- Credit reporting agencies There are three major credit reporting agencies: Equifax, Experian, and Trans Union. They will provide your credit report free once a year. Each interprets credit information differently, so obtaining annual reports from each agency may be advisable. Reports may be obtained by calling them or through their websites.
- Credit score A credit score is based on credit information and is subject to change as the information changes. Each of the three major credit agencies interprets credit information differently, so the score may be different for each agency. Scores range from 350-850. There is no industry standard, but a good score is typically 690 and above.
- Debt-to-income ratio Debt-to-income ratio is a measure of financial stability obtained by dividing monthly gross income into monthly minimum debt payments (excluding mortgage or rent). The lower your ratio, the better your financial condition. A recommended ratio is under 15%. A ratio of 20% or higher indicates excessive debt.
- Equal Credit Opportunity Act The Equal Credit Opportunity Act is a federal law that prohibits discriminating against a loan applicant based on race, religion, gender, age, marital status, or participation in a public assistance program.
- Finance charges Finance charges include interest paid on a loan, late payment fees, or any other fees charged by the lender.
- Financial statements Financial statements are details of income and expenses. They include bank statements, investment statements, credit statements, and any other sources of income and expenses.
- Fixed expenses Fixed expenses are those that remain the same month after month. These may include mortgage or rent, car payments, insurance, etc.
- Gross income Gross income is the amount of revenue earned prior to deductions for expenses.
- Income sources Sources of income are employment, alimony, rent, pension, interest earned, etc.
- Late payment charges When payments are received past the due date, lenders may assess late fees.
- Line of credit Upon approval of a loan, the lender will establish a maximum amount of credit.
- Loans/installment loans A mortgage is an example of installment credit. The consumer agrees to pay back the loan in established amounts over a predetermined period of time.
- Net income Net income is calculated by subtracting fixed and variable expenses from gross income.
- Online budget calculator The online budget calculator is a tool designed to assist in establishing a budget and preparing savings goals. It helps in analyzing all expenses and indicating areas where expenses may be reduced and savings accrued.
- Revolving account Revolving loans occur when a consumer borrows from a lender and pays the loan back in full or partial payments at a set time. Examples are Visa and Master Card.
- Savings buffer A savings buffer is an amount of money set aside for emergencies or unanticipated expenses.
- Ten-percent savings rule When establishing a budget and a savings account, the recommended savings is 10% of your income. Plan on 5% for short-term goals and 5% for long term.
- Variable expenses Variable expenses are those that fluctuate each month. They include groceries, gasoline, utilities, etc.