A low credit score could cost you nearly $400 in interest each year. Here's how to fix it

You should avoid carrying a credit card balance whenever possible. But if you do, make sure you're not paying more than necessary. Many banks use credit scores to assess lending risk, meaning the lower your credit score, the more you could pay in interest.

According to Consumer Financial Protection Bureau (CFPB) data, those with superprime and prime plus credit scores (720 or above) receive an average APR of 23.1%, which is 5.9% lower than those with subprime scores (580-619), who are charged an average APR of 29%.

While 5.9% might not seem like a big difference, credit card debt can often take months, if not years, to fully pay off. So, how much could a poor credit score be costing you?

CNBC Select takes a look at how much extra you could pay in interest with a lower score (based on the average U.S. credit card balance), plus some practical ways to improve your score.

A bad credit score can hurt many aspects of your financial life, but you might not know until you're hit with a rejection letter. If you have a bad credit score, you're more likely to be outright denied loans or credit cards you apply for. This could be something as simple as not getting approved for a cash-back card, or something more serious, like not being able to access a mortgage for a home.

If you do manage to get approved, you'll often receive less favorable rates and terms. For credit cards, this looks like a sky-high APR that can be exceptionally punishing if you miss payments. With mortgages, even a difference of 1% in your mortgage rate could be tens of thousands of dollars over the course of the loan.

Your credit score greatly affects how much you'll pay for various financial services. It may not directly impact the upfront cost, but as noted above, you may encounter lower approval rates and higher interest, which can result in you paying much more over time.

Many financial institutions will use your credit score to get an approximation of how likely you are to pay back your debts. The higher your credit score, the more likely you are to pay back your debts, meaning you're less risky for banks. On the flip side, a lower score signals that you're more likely to default. Banks may charge you more due to the risk they're taking on.

With credit cards, this is even more common, as many cards are unsecured debt (unless you have a secured credit card that requires an upfront deposit). If you default on an auto loan or your mortgage, there's a car or home as collateral. For credit cards, this often isn't the case, which is one of the reasons their APRs tend to be higher.

According to TransUnion's Q4 2025 Credit Industry Insights Report, released Feb. 19, 2026, the average credit card debt per borrower is $6,715. With this as our starting point, let's compare how much you could save with a lower interest rate.

Using the average interest rates for both superprime and subprime customers (23.1% and 29%, respectively), we can estimate just how much your credit score could be costing you each month. In this example, we'll make $250 monthly payments and show updates on principal and interest every six months:

To fully pay off their credit card debt, subprime borrowers will take five months longer than superprime borrowers (44 months vs. 39 months, respectively) and pay an additional $1,421 in interest. That works out to nearly $400 extra per year.

A subprime borrower will have paid a total of $4,249 in interest payments alone, over half of their total starting debt, compared to the $2,828 in interest paid by superprime borrowers.

While your best bet for consistent credit score growth is sticking to solid financial habits (like paying your bills on time and in full), there are some additional ways to help.

Consider credit repair

Credit repair companies contact the three main credit bureaus, Equifax, Experian and TransUnion, and attempt to have inaccurate or outdated negative marks removed from your credit reports. This also extends to banks and debt collectors, for example.

While you can technically repair your credit yourself, you may not want to; the process can be very time-consuming and, at times, rather confusing.

If you're looking for a credit repair company that offers a money-back guarantee, consider Credit Saint, which offers a free consultation for new customers. If no negative marks are removed from your credit report within 90 days, you can qualify for your money back.

Pay down outstanding debt

Since payment history makes up 35% of your credit score, paying down your revolving credit balances can make a substantial difference. Not only does making on-time payments help, but you're also lowering your credit utilization. This is the amount of your total available credit you're currently using, and it makes up another 30% of your credit score.

One way to help make sure you stick to your payment schedule is to try a budgeting app. These apps can help you organize your finances in a way that makes sense to you, and many of them feature tools for paying down debt, such as tracking it, setting aside additional payments and setting reminders.

If you're still on the fence, Goodbudget can be a great place to start. The app uses virtual envelope budgeting to set aside funds and offers both a free and paid experience for $10 per month ($80 per year).

Using a 0% APR credit card is another option for paying down credit card debt while avoiding interest payments for a specific period of time. The Citi® Diamond Preferred® Card offers a 0% intro APR period for 21 months on balance transfers (completed within four months of account opening), after which a variable APR of 16.49% to 27.24% will apply. This gives you 21 months during which your debt doesn't accrue interest, so anything you pay goes directly to the principal.

Though you'll pay a balance transfer fee to utilize this zero-interest offer, you can take advantage of a lower introductory balance transfer fee.

Get credit for monthly bills

Since your credit score only reflects information the credit bureaus receive, there's likely some payments you're making that aren't being accounted for. There are a few tools available to help report various types of bills that typically aren't tracked in your credit score. This includes expenses like utilities, phone bills, rent payments and more.

Experian Boost® works by connecting your bank account and letting you select the qualifying payments that you want reported and added to your Experian file. The service can go back up to two years of payment history for any qualifying bill with at least three payments in the last six months.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every personal finance article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of financial products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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