How to Improve Your Credit Score in 2025
How to Improve Your Credit Score in 2025
While your credit score is just a three-digit number, it can have a big impact on your life.
When building your life in the midst of economic uncertainty, a good credit score is an even more important asset. As the cost of borrowing rises, a good credit score can be a useful tool to keep your finances on track.
Luckily, your credit score is something that you can work on over time. It’s not a fixed number. Instead, the actions you take can cause your credit score to rise or fall. Let’s explore how to improve your credit score in 2025.
Why Should You Improve Your Credit Score
When it comes to managing your finances, your credit score might feel like one of many things you need to work on. While it might be true that a good credit score is just one part of a healthy financial picture, it’s an important piece of the puzzle. Here’s a look at two of the top reasons why you should consider improving your credit score.Lower Interest Rates
In recent years, the Federal Reserve has raised interest rates several times. As interest rates rose, the cost of borrowing money rose along with it. Some would-be borrowers were priced out of purchases due to higher interest rates. In times of higher interest rates, a good credit score is especially important. A good credit score can potentially open the door to lower interest rates, which means lower borrowing costs. Depending on the situation, a borrower with good credit could save thousands in interest payments compared to a borrower with bad credit. Let’s consider two examples of homebuyers with good and bad credit scores: Buyer 1 has a higher credit score that allows them to tap into a 5.0% interest rate for their 30-year fixed-rate $250,000 mortgage. With that, the buyer has a monthly mortgage payment of $1,342 and pays a total of $233,139 in interest over the life of the loan. Buyer 2 is also taking out a 30-year fixed-rate mortgage with a loan amount of $250,000. But a lower credit score means they lock in a 6% interest rate. With that, the buyer has a monthly mortgage payment of $1,499 and pays $289,595 in interest over the life of the loan. A higher credit score allows Buyer 1 to save $157 per month on their mortgage payments. Plus, they pay $56,456 less over the course of the loan than Buyer 2. Ultimately, a higher credit score can help you save money as a borrower. The potential to save a significant amount of money makes building credit a worthwhile opportunity for anyone with plans to borrow in the future.
Better Financing Opportunities
Access to lower interest rates isn’t the only reason to pursue a good credit score. Some lenders require a good credit score to even be considered for certain loan types. For example, many home loan lenders require a credit score of at least 620.Better Housing Opportunities
Even if you have no plans to purchase your own home, a good credit score can come in handy for renters. Many landlords will run a credit check before your lease is finalized. The landlord wants to make sure you have a history of making your payments on time. After all, the landlord wants to receive your rent checks on time. Renters with a bad credit score might have trouble finding an ideal apartment in a competitive rental market. Even if you find a great place to live, a bad credit score might translate into a higher deposit requirement. While you should get your deposit back at the end of the lease, it’s often a challenge to scrape up a large security deposit.Some Employers Care About Credit
Not all potential employers care about your credit, but some employers only want to hire employees with good credit reports. As the job market tightens, any edge you can gain over other applicants is worthwhile. In some cases, the right credit history could make all the difference in your job search. On the surface, it seems like your credit will only impact your finances. But the right credit history can make a world of difference in many aspects of your life, from finding a place to live to managing your monthly budget.How to Improve Your Credit Scores in 2025
It’s clear that the right credit scores can make a big difference in your life. The reality is that many Americans find themselves stuck with less-than-ideal scores, but fortunately, it’s entirely possible to improve your credit scores.
Although improving your credit scores can take a significant amount of effort, with consistent good credit habits, you can give your scores the boost you’ve been hoping for.
As you take action to improve your credit scores, be patient with the process. It would be nice if your credit scores shot through the roof overnight. But generally, it takes a concerted effort over a long period of time to get the lasting results you are after.
Below you’ll find some of the top strategies to employ when building your credit scores.
Check Your Credit Scores Regularly
It’s challenging to build your credit scores without regularly checking in on them. Luckily, it’s possible to check your credit scores regularly. A few different ways to check your credit scores include using free reports from your credit card issuer, working with Experian, or choosing a financial institution that offers this as a free service. For more details on how to check your FICO scores for free, take advantage of our full guide. Importantly, checking your own credit scores shouldn’t hurt your scores. It’s a common myth that checking your credit scores will harm them. But the reality is that checking your own credit scores is considered a soft inquiry, which won’t impact your scores. Don’t let this myth stop you from staying on top of your credit. You can monitor your credit scores over time to see how they change. Here’s a breakdown of the FICO credit score scale:- A poor credit score ranges from 300 to 579.
- A fair credit score ranges from 580 to 669.
- A good credit score ranges from 670 to 739.
- A very good credit score ranges from 740 to 799.
- An excellent credit score ranges from 800 to 850.
Check Your Credit Reports
Your credit reports are different than your credit scores. Essentially, your credit reports include all of the information about your credit management. They're like report cards about how you manage your credit. It includes things like open credit accounts, payment history, and credit inquiries. Typically, the information on your credit reports sticks around for 7 to 10 years. The information found on your credit reports is reported to the credit bureaus by creditors. As with anything, there is a possibility of mistakes on your credit reports. Unfortunately, mistakes on your credit reports can drag your credit scores down.
Since mistakes happen, it’s important to check your credit reports for mistakes regularly. If you find any mistakes, you can dispute them with the credit bureaus. If the credit bureaus agree that the information is a mistake, they will remove it from your credit reports. Typically, removing mistakes is a good thing for your credit scores.
Make On-time Payments a Priority
Payment history is the single most important factor considered by credit scores. In fact, your payment history accounts for 35% of your FICO scores. The heavy weight on your credit scores makes sense because creditors want to know if you will be able to reliably make on-time payments before issuing a loan. Since your credit scores put such an emphasis on your payment history, on-time payments should be a priority for anyone who wants to improve their credit. If possible, make on-time payments every single month. If you aren’t able to make a payment on time, communicate the details of your situation with your lender. In some cases, your lender will be able to offer a deadline extension or temporary forbearance which might protect your credit scores from the hit of a missed payment.Switch to Automatic Payments
Many bill providers offer automatic payment options as a way to stay on top of your monthly payments. If possible, it’s often a good idea to set up automatic payments on your credit accounts. Life happens even to the best of us. When life gets particularly busy, it’s very easy for a payment deadline to fall through the cracks. An automatic payment solution can save the day. For example, you might decide to set your credit card payments to automatic. With that, you’ll have peace of mind knowing that the minimum payment will be made on time every month. But it's still smart to check in with your bills to make sure you aren’t getting overcharged along the way. Personally, I have my bills on autopay as a safeguard for my credit. But I still comb through my credit card statements each month to catch any mistakes.Never Max Out a Credit Card
When you open a credit card account, you’ll see your maximum spending limit. While it might be tempting to spend to the limit, that’s not the right move for your credit scores. Instead, it’s important to spend significantly less than the limit. Your credit utilization falls into the debt category within your credit score factors. A high credit utilization ratio is often bad for your scores. For FICO scores, it’s best to keep your utilization ratio below 10%. You can calculate your credit utilization ratio by dividing your credit usage by your credit limit. For example, if you have a credit limit of $1,000 and a $700 balance, your credit utilization ratio is 70%.Create a Budget
A budget is an under-appreciated tool for building your credit score and improving your personal finances in general. Without a budget, it’s easy to overspend on things that don’t matter to you. But with a budget in place, you can choose to spend on what matters. For many, that includes building your credit. With the help of a budget, you can make sure you have the funds on hand to make on-time credit payments. Plus, you can work toward other financial goals by building them into your budget.Monitor Your Spending Regularly
It’s easy to overspend. With inflation hitting wallets across the country, it’s even easier to spend more than your budget can realistically support. Monitoring your spending on a regular basis can help you stay on top of your financial goals. If you are looking to build credit, you can curb overspending before it has a chance to hit your credit score. As you watch your spending, look for areas to cut back. For most of us, there are areas of our spending that could be optimized. While you might not need to cut too much spending out of your budget, keeping an eye on what you spend is a good way to stay aware of your financial situation.Save Money Every Single Month
Consider Adding More Accounts to Your Credit Profile
You can add more information to your credit history by opening your own primary accounts or by becoming an authorized user on someone else’s account, such as a friend or family member.Consider a Credit-Builder Loan
A credit-builder loan is a unique style of installment loan designed to help borrowers build credit. When you take out a credit-builder loan, you won’t receive any funds upfront. But you will be expected to make monthly installment payments right away. As you make on-time payments, the lender will report this activity to the credit bureaus. As long as you make on-time payments, the loan will help you improve your credit scores.The Bottom Line
It’s very possible to improve your credit scores in 2025. As you work to improve your credit scores, try implementing these strategies one at a time. Don’t be frustrated if the going is slow. Instead, have patience. With time, steady effort should have a positive impact on your credit scores. How do you plan to improve your credit this year? We’d love to hear your credit goals in the comments below. Do you know the #1 Tradeline Secret?
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Author
Sarah Sharkey is a popular financial journalist who has been featured in Bankrate, Money Under 30, GoBankingRates, and FinMasters. Sarah has a reputation for helping people develop smart money skills.
Her passion for strong personal finance balance sheets shines in her blog Adventurous Adulting, along with her love for adventures.
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