This is a key time to improve your credit score. Here’s why and how

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According to Experian, American consumers have an average credit score of 715. While this is a good score, it is not considered outstanding.

Experians classifies a credit score between 740 and 799 as very good, and a credit score between 800 and 850 as excellent. So if you want to qualify for the most affordable loan rates on your next loan, you’ll want your credit score to fall within these ranges. And it is especially important to do this now for one important reason.

Borrowing costs are finally falling

You may have heard that the Federal Reserve has begun lowering its benchmark interest rate. And you should know that the Fed will likely continue cutting rates in 2025.

If you’re wondering how this could affect your finances, here’s the scoop. A lower federal funds rate will likely lead to lower interest rates on consumer loans such as mortgages, auto loans, personal loans, etc. In 2025, you may want to co-sign on a loan when it will be cheaper to borrow.

That’s why now is such an important time to improve your credit score. If you work at it over the next few months, you may find that by the time you’re ready to sign the loan, you’ll be in a better position to not only qualify, but also get a great rate, resulting in lower monthly payments. .

How to Increase Your Credit Score

Significant improvements in your credit score don’t happen overnight. But if you make a commitment over the next few months, you may find that you have a great opportunity to co-sign on the loan in 2025, when rates become more attractive to you. Here’s how.

Pay on time

One of the most important factors when calculating your credit score is your payment history. It’s vital to pay your bills on time and avoid late payments in the coming months, so set calendar reminders to ensure you don’t fall behind. And whenever possible, set your bills to autopay.

Increase your income

Make sure you are not late paying your bills due to lack of funds. And if money is an issue, create a budget that will make it easier to track your expenses. You can also consider taking on a side hustle to supplement your income. Now is the perfect time to get one, given that many businesses need extra help during the holidays.

Pay off debt

Another great way to improve your credit score is to lower your credit utilization, which measures the amount of available credit on your cards that you use at the same time. Paying off some of your existing credit card debt can significantly improve your score while also saving you money on interest.

Let’s consider transferring the balance

If you’re juggling balances on multiple credit cards, consider a balance transfer. These offers typically give you a 0% APR period so you can get ahead of your debt and reduce it sooner. And if you’re willing to work on the side, you can use some of your extra income to pay off that debt faster. Click here for a list of the best credit cards for balance transfers..

Check your credit reports for errors

Finally, get a copy of your credit report from each reporting bureau—Experian, Equifax and TransUnion—and check it for errors. If you see an error that is causing you harm, such as a late payment that you actually made on time, contact the appropriate bureau immediately to try to correct the error.

Set yourself up for success

Borrowing costs have been high over the past few years, but major relief could be expected by 2025. It’s best to improve your credit score as soon as possible so you can take advantage of more affordable loan rates in the new year. .

Remember also that even if you don’t expect To borrow money in 2025, you never know when the need might arise. For example, you may need to replace your car unexpectedly. The higher your credit score, the easier it becomes to borrow money in a pinch.

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