Before applying for a loan, it’s crucial to make sure your credit score is in the best possible shape. A higher credit score can significantly improve your chances of getting approved and help you secure better loan terms, such as lower interest rates. In 2025, lenders are paying more attention to credit scores, so understanding how to boost your score before applying for a loan is essential. Whether you’re planning to apply for a mortgage, personal loan, or auto loan, taking steps to improve your credit can save you money in the long run.
Check your credit report for errors
The first step in improving your credit score is to thoroughly review your credit report for any errors or inaccuracies. Mistakes on your credit report, such as outdated information or incorrect balances, can lower your score and affect your ability to get approved for a loan.
You can get a free copy of your credit report from major bureaus such as Equifax, Experian, and TransUnion once per year. If you find any errors, file a dispute with the credit bureau to have them corrected. Even small discrepancies, like a late payment marked incorrectly, can harm your score, so it’s important to ensure your report is accurate before applying for a loan.
Pay your bills on time
One of the most effective ways to improve your credit score quickly is by making sure all your bills are paid on time. Payment history is the most significant factor affecting your credit score, accounting for about 35% of your score. Late payments, especially those that are 30 days or more overdue, can severely damage your credit score.
Set up automatic payments or reminders to ensure you never miss a due date. If you’ve missed any payments in the past, try to catch up and bring your accounts current before applying for a loan. Timely payments over time can boost your score and show lenders that you are a reliable borrower.
Reduce your credit utilization rate
Your credit utilization rate is the percentage of available credit that you are using, and it’s another important factor in determining your credit score. A high utilization rate-typically anything above 30%-can signal to lenders that you might be overextending yourself financially.
To boost your credit score, aim to reduce your credit utilization rate. You can do this by paying down existing balances or asking for a credit limit increase from your credit card issuer. A higher credit limit with the same balance will lower your utilization rate and can improve your score.
Avoid opening new credit accounts
When preparing to apply for a loan, it’s best to avoid opening new credit accounts in the months leading up to your application. Every time you apply for new credit, the lender performs a hard inquiry on your credit report, which can cause a small but temporary dip in your score.
If you’re looking to improve your credit score, focus on paying down your current debts rather than applying for new credit cards or loans. New credit accounts can lower your average account age and reduce the average length of your credit history, which can negatively affect your score.
Pay off outstanding debts
If you have any outstanding debts, such as collections or overdue accounts, paying them off can have a significant impact on your credit score. Accounts in collections or with a high balance can drag down your score, so it’s important to prioritize paying them off before applying for a loan.
If you’re unable to pay off the entire balance, contact the creditor to negotiate a payment plan. In some cases, you may be able to settle the debt for less than the full amount owed. Once paid off, the debt will be marked as “settled” or “paid,” which can improve your credit score.
Diversify your credit mix
Your credit mix—whether you have credit cards, loans, or lines of credit-accounts for about 10% of your credit score. If your credit mix is too narrow, consider diversifying by adding a different type of credit, such as a personal loan or an auto loan.
However, it’s important not to open new credit just for the sake of diversifying your credit mix. Only take out additional credit if you truly need it and can manage it responsibly. Adding a new type of credit can help your score, but only if you can demonstrate that you can handle it effectively.
Avoid closing old accounts
While it may seem tempting to close unused credit cards to simplify your finances, doing so can actually hurt your credit score. The length of your credit history makes up about 15% of your score, and closing an old account reduces the average age of your accounts.
If you want to improve your score, avoid closing old credit accounts unless absolutely necessary. Keeping older accounts open, even if they’re not used frequently, can help maintain a longer credit history and positively impact your score.
Conclusion
Boosting your credit score before applying for a loan is a crucial step to getting better loan terms and approval. Start by reviewing your credit report for errors, paying bills on time, reducing your credit utilization rate, and avoiding opening new accounts. Paying off existing debts and maintaining a healthy credit mix can also help raise your score. By following these strategies, you can improve your chances of securing a loan with favorable terms and saving money over the life of the loan.