Can I Improve My Credit Score Over the Course of a Year?

If you know you will be applying for a new loan or credit score about a year from now, focus on improving your credit score now. One year is plenty of time to see major improvement in your credit score. A higher credit score will increase your chance of being approved for the loan and help you get a lower interest rate.

Payment History

Your payment history makes up the single largest component of your credit score, so focus here to see major improvement. Ideally, your credit report should not show any late payments, bankruptcies or other negative data related to payment history. However, if you have any of these, they stay on your credit report for at least seven years. Payment history mistakes affect your credit score less over time, so focus on avoiding making mistakes for the next year. Enrolling in automatic payments can guarantee on-time payments. Liz Weston also recommends asking a lender for a goodwill adjustment to remove a late payment from your report or asking that an account be re-aged to remove the late payment after one year of on-time payments.

Amounts Owed

The amounts you owe on your credit accounts are the second most important factor in your credit score. Buckle down and reduce your debt over the next year to improve your credit score. In particular, focus on reducing the balance on each of your credit cards to no more than 30 percent of the card's limit. To do this, you will likely need to pay more than the minimum every month. Cut your spending in other areas, such as eating out, entertainment and shopping, to find money in your budget for extra debt payments.

Other Areas

The last three components of your credit score are the length of your credit history, the presence of new credit accounts and the variety of types of credit you have. Do not apply for any new credit accounts and, if possible, do not close any accounts during the year. This will both reduce the amount of new credit you have and increase the age of your existing accounts. Although adding a new type of credit account can help your score in the area that considers types of credit accounts, it hurts your score in the area of new credit, so it is unlikely to benefit you overall.

Credit Report Errors

Some people might be able to improve their credit scores by correcting errors on their credit report. At the beginning of the year, get a credit report from each credit bureau through the Annual Credit Report website. Look over the reports for errors, such as an account that doesn't belong to you or a late payment when you always paid on time. If you find an error, dispute it with each credit bureau that provided a report on which the error appears. The bottom of the credit report should list a phone number or website where you can file the dispute.