As 2024 winds down, it’s the perfect time to start thinking ahead to 2025. Whether you’re planning to buy a home, get a new car, or take out a loan for any reason, your credit score plays a big role in getting approved—and getting a good rate.
If you’re like most people, credit might not be something you think about daily. But trust me, starting the new year with a solid credit plan can save you a lot of stress, money, and frustration when it’s time to apply for a loan. At Credit Recovery Group, we work with clients all year round to help them improve their credit, and we know the steps you need to take to make 2025 your year for financial success.
Let’s talk about how you can prep your credit for the year ahead and boost your chances of loan approval.
Step 1: Check Your Credit Report for Mistakes
Before diving into any big changes, it’s important to see where you stand. A good first step in preparing your credit for the new year is to check your credit report. You can get a free copy of your credit report every year from the three major bureaus: Equifax, Experian, and TransUnion. If you need expert advice, you can also schedule a complimentary credit evaluation with our team.
Why it matters: You’d be surprised at how often errors slip into credit reports. A few years ago, a client of ours, came to us frustrated. She’d been denied a loan for a car she wanted because her credit score was “too low,” even though she had been paying off her debt consistently. After reviewing her credit report, we found a mix-up with her personal information and some incorrect late payments from a utility she never even had. We helped her dispute the errors, and once they were fixed, her credit score improved by 40 points!
Pro Tip: When you’re checking your credit report, look for errors like duplicate accounts, outdated information, or accounts that don’t belong to you. If you spot anything wrong, dispute it right away.
Step 2: Start Paying Down Debt
If you have credit card debt or other types of loans, paying it down should be your next focus. Lenders want to see that you’re not over-leveraged (i.e., borrowing more than you can afford to repay). One of the easiest ways to improve your credit score is by reducing the amount of debt you owe.
Why it matters: Your credit utilization ratio (how much of your available credit you’re using) is one of the biggest factors in your credit score. The lower your utilization, the better your score. So if you have high balances on your credit cards, it’s time to tackle them.
I remember helping a client named James last year. He had a solid job and was looking to buy his first home. The only problem? His credit card balances were maxed out. After working with him on a budget and prioritizing paying down his debt, James was able to reduce his credit utilization rate—and within a few months, his credit score shot up enough for him to secure a mortgage at a great rate.
Pro Tip: If you can, focus on paying off the credit cards with the highest interest rates first. This way, you’ll save money in interest and improve your credit faster.
Step 3: Fix Any Late Payments
Late payments can stick around on your credit report for a while, and they can make a huge impact on your score. If you’ve had any missed payments recently, it’s important to address them. The good news is that you can still improve your credit even if you’ve been late in the past.
Why it matters: Lenders see late payments as a sign that you may not be reliable in repaying debt. The longer the payment is overdue, the worse it is for your credit. If you have late payments on your report, it’s worth working with your creditors to get them updated or removed.
Pro Tip: If your late payments are more than a couple of years old, you may be able to request a goodwill adjustment. It’s worth asking, especially if the late payment was a one-time mistake.
Step 4: Increase Your Credit Limit (But Don’t Use It!)
One way to improve your credit score quickly is by increasing your credit limit. Increasing your limit will lower your credit utilization ratio (assuming you don’t increase your spending).
Why it matters: A higher credit limit gives you more room to borrow without using too much of your available credit. As a result, your credit utilization rate will decrease, which can boost your credit score.
A few months ago, a client reach out to us for help. His credit score was good, but he had a few credit cards that were nearing their limits. We advised him to contact his credit card issuers and request higher limits. Sure enough, they agreed, and his utilization rate dropped. As a result, his score jumped by 20 points within a few weeks!
Pro Tip: Make sure you’re disciplined with your spending if you get a credit limit increase. If you start spending more, you could undo the improvements.
Step 5: Don’t Open Any New Accounts
Now, I know that it’s tempting to apply for new credit cards, especially when you’re working on improving your credit. But here’s the thing: Opening new accounts can actually hurt your score in the short term.
Why it matters: Every time you apply for new credit, the lender will do a hard inquiry on your credit report, which can temporarily drop your score. Plus, new accounts lower your average account age, which can impact your credit score as well.
Take our client Sarah, who decided to open a new credit card to improve her credit mix. While it was a good move in the long run, she didn’t realize that the hard inquiry from the application would drop her score a bit. We worked with her on a strategy to help her rebuild her credit, and over time, the impact of the inquiry lessened.
Pro Tip: Avoid applying for new credit in the months leading up to a big loan application. Your score will be better if you stick with the cards and accounts you already have.
Step 6: Start Building Positive Credit Habits
Good credit isn’t built overnight—it takes time, consistency, and smart habits. One of the best things you can do for your credit is develop a solid financial routine. Start paying your bills on time, keep your credit utilization low, and check your credit regularly.
Pro Tip: Set up automatic payments for your bills to make sure you never miss a due date.
Step 7: Get Professional Help if You Need It
If all of this sounds a little overwhelming or you just don’t have the time to tackle it yourself, it might be worth getting help from a professional credit repair company like Credit Recovery Group. We specialize in helping clients repair and improve their credit scores, and we can guide you through each step of the process.
Working with professionals means you don’t have to figure it out on your own. We can help you dispute errors, deal with creditors, and create a personalized action plan to get your credit where it needs to be.
Pro Tip: Don’t be afraid to ask for help! We offer free, no-obligation credit consultations to help you understand where you stand and what steps you need to take.
Conclusion: Prepare Your Credit for 2025
The new year is just around the corner, and now’s the time to take charge of your credit. By following these steps and staying consistent, you can set yourself up for success and secure the loans you need in 2025.
If you need help getting started or have questions, contact Credit Recovery Group today for your free consultation. Let us help you improve your credit and reach your financial goals.