Fortunately, the answer to that last question is "yes." There are several ways you can benefit from a good credit score. These are especially valuable if you recently had a so-so score and, through good behavior, kicked it up a notch to get it into good score territory. These tips could save you a few bucks this year, which always comes in handy during these tough times.
First off, what is a good credit score? I consider anything above a 700 to be good. If your score is above 750, that's a great score. If you fall in the 650 to 700 range, that's still a pretty decent score and one that should net you a few benefits.
Negotiate Your Rent
Landlords care about one thing above all others - the ability to pay. Everything else is secondary, especially if there's a monthly mortgage payment to pay. If you are able to pay, have demonstrated a long history of paying on time without any hassles, then landlords are usually willing to cut you a deal to keep you around. If rents have been falling in your area, try to negotiate your rent. If you have six months left on the lease, consider reset the lease back to a year and asking for a price discount. This works best with individual landlords.
If they won't budge on rent, ask for some of your security deposit back. For justification, cite your payment history and your strong credit score. It's your money anyway.
Shop Around for Insurance
Insurance companies use your credit score to set your premiums. If you've recently improved your score, shop around for all of your insurance policies and you may discover a discount. Be sure to bring this up with your current insurer because it's still a competitive market, they may be willing to cut a bit of their profit margin to keep you around as a customer.
Be sure to take into account any "loyalty" discounts that may be on the horizon. For example, if you are accident free for five years, Geico will trim a bit off your premiums. If you are four years in, be sure to ask the insurance agent how much you'd save once the loyalty discount is factored in.
Credit Piggybacking
This was a practice popularized a few years ago and involves someone with good credit "lending" it to someone with weaker credit. The person with good credit would add the person with bad credit as an authorized user on their credit card account. The person with bad credit would never receive a card and they would benefit from being associated with a good account. People were being paid hundreds of dollars to be the person with good credit, lending out their authorized user accounts, and at one point Fair Isaac said they would remove that as a factor in the credit score formula.
Today, it's unclear how much of an impact this has because while Fair Isaac threatened to remove it as a factor, they backed down after public outcry. There are legitimate reasons why piggybacking happens (spouses share cards, parents share cards with their kids) and Fair Isaac was unable to distinguish between the two. So if you have good credit, you could always try selling it to someone wanting to hitch a ride!
0 Percent Balance Transfers
Another tactic popularized several years ago was known as balance transfer arbitrage. Balance transfer arbitrage is where you would open up several credit cards offer no fee 0 percent balance transfer and then deposit them in high interest savings accounts. You'd borrow money for 12 months at 0 percent APR and earn interest at 5 percent APY, back when savings account yields were much higher.
Nowadays, between balance transfer fees and low interest rates, this strategy is obsolete but it could make a comeback. Stick this one in your back pocket.
Do you know of any great ways to cash in on responsible credit use? Have you been a piggybacker or cash in on the arbitrage craze a few years ago?
Jim Wang writes about money daily at Bargaineering.com.
