The Hidden Cost of Bad Credit

It's bad enough that a few credit missteps can force you into higher-interest credit cards and loans. But did you know those dings can raise your auto insurance rates too?

Your FICO score --can have an impact far beyond the account where the trouble started. Even if you don't have any dings, your score might be low enough to affect your auto insurance rates. If you don't use your credit cards, after all, the credit industry won't have a history of good credit to evaluate. You'll end up with a less-than-ideal rating. Insurance companies will see you as a less-than-ideal risk, and price your policies accordingly.

A report issued last week by the Federal Trade Commission describes insurance companies such as MetLife and Allstate looking into using credit history to assess risk as far back as the early 1980s.

The report notes that every single one of the top 15 auto insurance companies uses these scores. Case studies in the report note the particular success of Progressive in using these scores to improve its business.