Your low credit score could be costing you thousands of dollars. Here are ways to fix it.
Bad credit could be costing you significantly, new data reveals.
Americans with a credit score of 620 or lower pay roughly $3,400 more per year in higher loan interest rates and insurance premiums, according to a new study from Bankrate, amounting to what the financial services company calls a "subprime tax."
Over a lifetime, that can add up to more than $100,000 in added interest on credit cards, mortgages and auto loans, and higher home and auto insurance premiums.
If your credit score is low, lenders believe you're more likely to pay late. Your credit score acts as a "prediction of your credit behavior, such as how likely you are to pay a loan back on time, based on information from your credit reports," according to the Consumer Financial Protection Bureau.
Feeling 'trapped'
When Patrice Hubert hit her lowest point with credit card debt, she says she watched her credit score nosedive with it.
"I'd been dealing with credit card debt for a while, since before I started my PhD, and then when I got into it, my income dropped, then I became a mom during my PhD," she said. "It was just like a spiral."
The West Philadelphia mom found herself buried under $35,000 in debt, unable to make her minimum monthly payments.
"It tanked," she said. "I'm pretty sure it fell like a hundred points, and then all the cards were maxed out so that added to it."
At the time, she said she put off purchasing a vehicle because she would've been hit with a significantly higher interest rate on the loan.
"You feel trapped," she said.
Hubert started taking steps to reverse her credit crisis. She stopped spending on her cards and enrolled in a debt management plan with the nonprofit credit counseling agency Money Management International. She said she's sharing her experience to help others.
"I think we should be open if we're having problems," she said. "The more you know it's not just you, I think the easier you'll be able to handle it."
Improving your credit
Bankrate's senior industry analyst Ted Rossman says the report shows the value of having a good credit score, like increasing your likelihood of receiving better financing terms.
"Lenders would say, 'Well, it's fair that we charge people more when they have a lower credit score because they're less likely to pay us back,' but it shows from a consumer standpoint how it's really important to bump up your score," Rossman said.
Rossman says the good news is that you don't have to be locked into a low credit score forever.
"So if you've slipped up, you've paid late, there are some things you can do to offset that," he said.
The first step you can take to improve your credit score is to review your credit reports. But more importantly, Rossman said, make sure it's correct.
"The Federal Trade Commission says that about one in five Americans have errors on their credit reports," he said. "Some of these are really significant; it could be identity theft, it could be an on-time payment that was mistakenly marked as late."
You can request your report for free through annualcreditreport.com. Many banks and credit card issuers also provide free access to your FICO score.
The next best thing to improve your score is to commit to reducing your debt. On-time payments factor into a significant portion of your score.
Your credit utilization ratio, which is how much you owe relative to how much credit you have available to you, also has a substantial impact. It accounts for up to 30% of your score, according to FICO.
Rossman also cautions against opening any new accounts until you've started paying down your debt.
You can also consider becoming an authorized user of a parent's or spouse's credit card to have their good credit history translate to you.
Signing up for services like Experian Boost or eCredable can help improve your score by letting you add your on-time payment of certain household bills that typically go unreported to your credit file. A June 2025 study found that rent reporting "can tangibly improve people's credit scores."
