How Much Can Your Credit Score Go Up Each Month?

credit-score-pie-chartBefore we can answer how much your credit score can go up each month, we must first explain how a credit score is built, then show how a score can increase on a monthly basis.

How a credit score is built

The most widely used provider of credit scores is the Fair Issac Corporation or FICO as it is more commonly called. FICO builds its scores on five categories, each accounting for a percentage of your credit score. These categories are: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%), types of credit used (10%).

How the categories affect your score

Obviously, having a habit of paying all of your bills on time will increase your score, but did you know that one late payment will affect each of us in a different way? For example, a person with an excellent credit score of 780 could lose 100 points by making one late payment, whereas a person who’s score is sitting at 550 can make the same late payment and may only lose 10 points.

Amounts owed is sometime referred to as your debt utilization ratio. FICO understands that you will use some of the credit that is available to you, but, if you use a lot of it, you become a repayment risk. As long as you use less than 30 percent of your available credit, each account boosts your credit score. Once you exceed thirty percent, FICO begins to lower your score. The higher your balances become, the lower your score goes. Let’s say someone with a score of 780 suddenly exceeds 40 percent on their accounts, their score can dip to 720. If they exceed 90 percent, their score could dip below 680.

Length of credit history is an easy to control factor. Opening or closing an account will have an immediate affect on your score. The impact will fade each month. Despite the fading impact, you should consider carefully before closing any credit account.

Obtaining new credit, even applying for it will lower your credit score at first. Applying for a loan or credit card will lower your score by a few points per application; however, FICO understands that you may shop around for the best possible terms. So, if you apply for a line of credit through multiple lenders within a 14-21 day period, your score will only drop one time. The reason that you score drops is that lenders wonder why you need so much credit all at once. Their usually thought is that you are in financial trouble, so you are more of a risk. Luckily, the effects of applying for or obtaining new credit completely fade within 90 days after the last application is made.

Many people think that all they need to do to have good credit is to pay their credit cards on time. Nothing could be further from the truth. Having a single credit card will help, but you must use a combination of multiple revolving credit accounts (credit cards) and installment credit (loans) in order to have the highest possible credit score. The installment loans should also have a payment in excess of $150 to give your credit score the biggest boost.

As you can see, there are quite a few factors to be considered when determining how much your credit score can go up each month. To make matters more confusing, if you have a low credit score and begin to do everything right, your score will go up faster than the score of a person who has been doing well all along. Let’s assume that two people look at their scores; one has a score of 550, the other 750. The next month, assuming that there have been no new accounts opened and all payments were made on time, the person with the 550 score may see a boost of 30 points. The person with a score of 750 may see no change at all.

In general, experts say that an increase of 5% per month is possible if you are starting with a subprime score.

Battling Your Emotions To Stay In Control Of Your Debt

Emotions versus logic, we have all faced that dilemma. Logically, we know that we should stick to our budget, save money, and pay off debt. Emotionally, we are tired, irritable, and feel that we have earned a little splurge now and then. If you have a well-rounded budget, it will include these splurges, so no problem, right? The problem arises if your emotions allow you to rationalize an excessive splurge. So what do you do?

Do not beat yourself up

The first thing to keep in mind is that no one is perfect. I write for this site on a weekly basis, offering tips and clues to help you along your chosen path. I would love to pretend that I have never made an emotional purchase, but there is no sense in lying to you. It happens every five to six months, no matter  how I fight it, somehow I end up rationalizing an excessive purchase. The purchase is followed by rationalization and self negotiation, like I can skip this in order to cover that. If I gave into that thinking, I would soon be dipping into areas of my budget that can not be borrowed from and risk losing control of the whole process.

How does this happen?

These emotional purchases can happen simply because we have overloaded ourselves doing the right thing. You could have a great budget, but decide to add a second job or a bit of overtime in order to pay something off. While either is a wise way to pay off debt,  we can exhaust ourselves. When we are exhausted our brains become overloaded and we can lose our ability to make the most rational decisions, allowing our emotions to take over. Hence, doing the right thing, budget wise, can lead to budget destroying emotional purchases.

What can you do?

The best way to avoid these purchases is to add to your support system. Is there someone whose disapproval you try to avoid? Is that aversion strong enough to help you control yourself? If so, you can call them when you are shopping or add them to your credit cards as an authorized user. If you know that they will be able to see your purchases online and question you about them, the aversion to their disapproval may help you rethink some of those purchases.

Personally, I do not have someone like that, so I rely on self-talk. It has been several years since I was drowning in credit card debt, yet I still do not carry them with me. The cards are five hundred paces from my back door. Those five hundred paces are very tedious and aggravating when I am doubting the need for making them the whole time. Frequently, the walk gives me enough time to talk myself out of using the card. The system is a good one. The only flaw is that I am human, but each time I use my card makes me work harder to avoid it the next time.

BMW: An Economic Development Coup for SC

BMW-Plant

BMW is encompassing more and more countries as their new factories begin to blanket North America in their latest expansion. There can be no doubt the competition is high in spite of the thousands of jobs that BMW brings when it creates a new car factory. Since 2008, a study by USC’s Moore School of Business sets the annual economic impact of the BMW plant in South Carolina at $8 billion dollars, along with the creation of more than 8000 jobs. This has been a staggering boon for the state’s economy, especially considering how far it outpaces original estimates from 1992, when BMW expected to create just 2000 jobs with a capital investment of just $600 million. South Carolina is second only to California in exports to Germany, and 70% of these vehicles are shipped out through Charleston, further boosting the state’s economy.

South Carolina Department of Commerce Secretary Bobby Hitt largely credits BMW with helping transform the state’s struggling textile-based economy to serious manufacturing hub, with more than 250 automotive-related companies, 40 of which are in BMW direct supplier system–employing another 22,000 workers. Plans to build a third factory on the 1200 acre site to manufacture the BMW X7 luxury SUV would only further bolster the region’s economy, though nothing has been confirmed as yet.

Read more here:
http://www.islandpacket.com/2014/03/26/3025526/bmw-has-transformed-scs-economy.html