TORONTO -- A Listowel, Ont. Woman said she was shocked she will have to pay more than $17,000 in borrowing costs for a used van because of her low credit score.

"I don't want to pay double for a van. I can't afford to do that," said Theresa Loth.

Loth said she bought a 2014 Dodge Grand Caravan three years ago and has been paying about $500 a month in loan payments.

She recently went back to the dealership to see how much money she owed and was shocked to see that she has barely paid for half of it due to high interest charges.

When she bought the van she knew she would have to pay higher interest costs because she said she has been late on payments before and has a low credit score.

A credit score is a number between 300 and 850 that tells lenders if you're a good credit risk and the higher the number, the better.

“We knew going in that it was going to cost us more. I knew that I was going to have to pay 20 per cent interest and I was OK with that," said Loth.

However, now she is shocked seeing exactly how much the van is actually going to cost her.

The price of the van was $17,694, but with other fees and taxes the total came to $22,937. Loth took a 6-year loan with an annual interest rate of 21.65 per cent.

The cost of borrowing is $17,314 for a total cost owed of $39,457. Loth said the amount of interest she has to pay is about the same cost of the van.

“For them to tell me after paying $20,000 I still owe another $20,000 after three years is kind of insane," said Loth.

Laurie Campbell, director of client financial wellness with Bromwich & Smith licensed insolvency trustees, said that once you have a low credit score it can take years to improve it.

"The poorer your credit rating the more you are going to pay, the higher your interest rates are going to be for whatever products and loans you get," said Campbell.

Even being late or missing one payment can negatively impact your credit score.

“Whether it's a cell phone bill, a credit card payment or a loan installment, whatever the case may be, you have to make your payments on time, every time" said Campbell.

To improve your credit score, use credit wisely and always pay your bills on time. Always at least make the minimum monthly payment and limit your number of credit applications.

You should check your credit score annually and look for errors.

Loth feels it's unfair that people who have had credit issues in the past should have to pay higher interest rates on loans.

"I feel like it's a predatory system going after people who are struggling, the working poor. It doesn't make any sense," said Loth.

You used to have to pay to get your credit score, but now Equifax will let you check it online for free or you could also ask your bank.

It’s to something to monitor as you want to make sure your credit score number is stable or going up and not down.

  • 300-579: Poor
  • 580-669: Fair
  • 670-739: Good
  • 740-799: Very good
  • 800-850: Excellent

Source Equifax