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.