When you are repairing your credit, one of the important things to understand is how your credit score is calculated. There are two main credit rating systems calculating your score, the Fair Isaac Corporation’s FICO score and the VantageScore. I want to make sure that you understand each of them, so this week, we are discussing the VantageScore.
When I first started working on repairing my credit and raising my credit score, it was because I wanted to buy a home. Let’s just say that my credit score was far from where it needed to be to be approved for a home loan. In full disclosure, my credit score was a 411, nearly as low as it could get. What I didn’t understand, was how my credit score was calculated. And had I understood that, it may not have taken me as long to get my score high enough to obtain my goal.
Wherever you are on your financial journey, the whole concept of an emergency fund is an important cog in the wheel. Back in December, I walked through a basic guide of setting up a starter emergency fund. You may be still building up to that $1,000, and maybe you are there already and ready to get your emergency fund fully funded.
For my family, getting the emergency fund set up is a critical part of our financial plan. After losing two jobs in just over a year, it had become very clear why we needed it. Initially, I thought the $1,000 along with some savings, would tide us over until I found a job. A thousand dollars goes away really fast when you are looking at mortgage, food, bills, and more. That is why one of our short term goals is to get our emergency fund fully funded. Most experts say that to fully fund your emergency savings, you should have 3-6 months of living expenses. I am going to cover how to determine a month of expenses, but let’s just pick a number really quick. Let’s say your monthly expenses are $3,000. If we take that and times it by three, we get $9,000. Times it by 6 and we have $18,000. That is a lot of money, right? That is why a starter fund of $1,000 is just that, a starter emergency fund. It isn’t meant to carry you over until you get the next job.