How to Cash in on Your Good Credit

Now that we know all the unexpected places our credit score is being used, is there anyway to turn this to our advantage? How do you cash in on your good name?

If you have a good credit score, you’re already saving money on things like rent, so this article will be of little help to you. If you had a weaker score and just recently improved it, here are some ideas of how you can cash in on your good behavior.

If you’re renting and put down a security deposit, ask for some of it back. There are two main reasons why landlords retain a security deposit – to protect against damage and to protect against non-payment of rent. If your score was lower, the landlord probably asked for a larger deposit. Now that you’ve improved your score, ask if you can have some of the money back. This works better with individual landlords rather than management companies because of the red tape. (while you’re at it, you can always try to negotiate your rent)

Shop around for insurance. Take a few minutes (fifteen is all it takes according to Geico!) to shop around for your car insurance because credit plays a role in determining your premiums. You might find savings just by shopping around after an increase in your score. You won’t be able to get your current insurance to lower your premiums until the next renewal but most insurance policies do not penalize you for switching.

Try credit piggybacking. Bankrate published an article on credit piggybacking and described how it worked. Someone with a good credit score, our credit score seller, would add someone with a bad credit score, our credit score buyer, as an authorized user on their credit card. The buyer wouldn’t get the card or get access to the line of credit, they benefited by having that account appear on their report. Cost? Bankrate cited around $200 per user. FICO considered negating the effects of piggybacking with their FICO 08 score but backed off, so piggybacking can still improve your score and you can still make money off it. (there are risks to this, the buyer will know the bank, how much credit is available, and other details but not the card number)

Here’s one technique that won’t work now but might make a comeback – keep this in your back pocket. Years ago, you could play the balance arbitrage game of taking out a 0% APY balance transfer and depositing it into a online bank account. Many credit cards didn’t charge you a fee for the balance transfer so you were basically borrowing at 0% and earning 5% interest on the savings. Nowadays, savings interest rates are lower and balance transfers carry fees, making it a losing proposition. While we don’t yet know if this is the end of the 0% balance transfer era, it’s still good to know this strategy in case it makes a roaring comeback.

Do you know of any other ways to cash in on good credit? Have you sold an authorized user spot in a piggybacking scheme? Did you get in on the balance transfer arbitrage craze a few years ago?

Jim writes about personal finance at Bargaineering.com.

(Photo: frankieleon)

Comments

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  1. SGriswold says:

    One minor error: Most personal lines insurance policies (auto, homeowner, renters) DO charge you for switching – it’s called a “short rate penalty” and is often around 10% of the remaining premium. Make sure you refer to your policy documents (or call your insurer/agent) to find out if this applies to you. Saving a few bucks on insurance is always great but not when the savings are immediately negated by a penalty.

    • thetango says:

      This is true but some states have laws that prohibit this type of behavior.

    • catastrophegirl chooses not to fly says:

      @SGriswold: true, i switched my car insurance when i bought a home to get the line item discount. i was charged a pro rated percentage of the remainder of my insurance term for ending the policy. however, the $300 a year i saved with the line item discount on combining the policies made the $75 charge worth it.

  2. wcnghj says:

    NO NO NO!

    Piggybacking is STUPID, from a relative for free, yes, it’s fine.

    • MsAnthropy says:

      @wcnghj:

      Agreed. Being an AU on a spouse/other relative’s account is fine, but what’s being alluded to here is very dodgy indeed. Seriously – I can’t believe Consumerist would be advocating this at all. It’s such a very, very bad idea, and is the whole reason why authorized user accounts very nearly ended up being discounted from FICO scoring altogether. Plus… I thought that AU accounts would only count now if you share the same last name or address as the main accountholder?

      • jamar0303 says:

        @MsAnthropy: Which is bad. I got my cousin to put me on her Discover account as an AU. I do not share an address or last name with her. I do not open my own for practical reasons (I’m not in the US; I’d open one here but they need a work visa; I’m here as a student)

        I had thought that it was already discounted from the FICO scoring which is why I then got a bunch of checking accounts while in China (2 from local banks, one from a UK bank, and one from the local Citibank branch) in case I can’t open any when I get back to the US due to credit checks (my report is pretty much blank). So is it?

    • sammy_b says:

      @wcnghj: Agreed – ONLY from a trusted relative.

      my mom put me on her credit card when I was 16 and on an out-of-country trip, she just wanted me to have a way to buy a plane ticket home if everything went awry. When i got back she took her card back but kept me on the account until i was about 22. She charged up big balances and paid them off in full, on time every month for YEARS. It helped my credit score immensely, but if it weren’t my mom it wouldn’t be worth it. The risks are simply too great.

  3. wvFrugan says:

    How about a thread “How to Cash in on Your BAD Credit”?

    It can actually save you more money than good credit, I know!

  4. azzie says:

    Piggybacking greatly helps to people with short credit history.

    If you have a credit card since, say, 2001 and you add an authorized person with short credit history today, credit report of that person will reflect that joint account was open 2001 (not in 2009). So you’ve just made the length of that person’s credit history 8 years. Credit score skyrockets at this point.

    This trick greatly helps newcomers to the country (if you can trust them).

    It’s funny – my wife’s much credit history is much longer than she’s actually been in US.

    • sniplover says:

      @azzie: similarly, when my brother and I went to college, we were both made AUs and given cards on one of our parents’ credit accounts… the account has been open since 1984, which is when I was born. Given that and my own fiscal responsibility (student loans, my own cc), I have an excellent credit score!

    • Dwight K. Schrute says:

      @azzie: However, it is quite obvious to any credit analyst looking at one’s credit repot which trades are their own and which are are just “authorized user” accounts.

  5. LatherRinseRepeat says:

    I’m not sure about the insurance tip. For car insurance, at least. I think your credit history weighs less than your driving record and zip code. But I guess it varies, depending on the insurance company.

    Also, insurance companies have their own database for tracking you. Let’s say you got in an accident 5 years ago. Although, it’s been wiped from your public DMV record by now, the CLUE database still has it on record.

    So if you were to switch insurance companies, the new insurance company would most likely query the CLUE database rather than the DMV records. So yeah, you’re kinda screwed and wind up paying the higher premium anyways.

  6. Brazell says:

    Consumerist, you bitch and moan about people handing over their zip code at checkout or giving their receipt to a guy at Best Buy walking out of the store … but then you advocate offering up your credit line for piggybacking? C’mon now.

    Anybody who has spent any amount of energy in their life protecting their credit should NOT piggyback… you’re just looking for regret.

  7. imationlh says:

    I work for an insurance company located in the northwest U.S. Your credit score can affect your premium by up to 56 percent. All insurances companies, large and small, use your credit score to give you a discount or, as I like to put it, rape you in the pooper because of a low credit score. It’s ridiculous.

  8. MaytagRepairman says:

    Umm. Back in February Consumerist said piggybacking doesn’t work any more unless it is for a spouse or child.

    [consumerist.com]

  9. spinfire says:

    There are still ways to play the arbitrage game. I purchased a computer (well, parts :) from Newegg and they offer 0% (deferred!) interest for one year if you make a purchase of $1000 or more. My purchase was for $1200. As long as you pay it off in full by the end of the 1 year promotion you pay 0% interest. They do a nice job of reminding you the statements, and even show you how much interest has accrued (at 24% or something ridiculous).

    I put the $1200 in a 1 year CD earning 2%, so I’ll make 2%. If I’d used my CC rewards card I would only have gotten 1%, so this is definitely worth it.

    • joeny1980 says:

      @spinfire: Thats pretty smart, using the CD. But really, you only get 1% on your CC rewards card? I have Discover and get 3% and a promotional 5% for certain things within each quarter (this quarter, I believe it is restaurants, grocery stores, movies, and some others). I charge everything possible including all of my utility bills. Obviously without carrying a balance and paying each month. Its pretty sweet knowing that every hundred bucks I spend I make back $3. Not alot but it adds up, and its free money. Better yet it allows you to get your rewards as cash or in gift cards. Sometimes the gift cards are double value! So for example – you can spend $1,000 to book a vacation that just happens to fall into the 5% promotional quarter. So you just earned $50. Now you use that $50 to buy a gift card worth $75 or maybe even $100 for say… Gap or Chili’s or something like that. As long as its something that you would normally use and you don’t treat it as a bonus – you just got back up to 10% free money.

  10. whitecat says:

    DO NOT BUY INSURANCE BASED SOLELY ON PREMIUM COST.

    (Sorry for shouting.)

    But if you do this, you might end up with Allstate, and Allstate sucks. The reason their rates are so low is that they deny legitimate claims. That’s also why they’re known as the worst insurance company in America.

    Don’t just go by low premiums, go by how they will treat you when you have a claim. If you pay your low premium for years only to be denied coverage or low-balled when you have a claim, you’re just throwing your money away. Pay a little higher premium and enjoy peace of mind – that’s what insurance is for. If you’re with Allstate, switch now to a more reputable insurer.