You’ve been rigorously paying down your credit balance every month, you’ve been staying way under your limit, and you don’t even know the meaning of overcharge fees, all in pursuit of that amazing credit score. But, for what? You haven’t really seen any benefits, and you’re starting to wonder what the point of having a good score is at all.
Well, it’s time for you to get what you deserve. Because if you have a great credit score, there are some equally great ways you can leverage it. I’m talking about lower interest rates, free JetBlue flights, and maybe even a successful business with your name on it.
These are 5 amazing ways you can leverage your high credit score! Let’s go!
Shop for New Insurance
One of the best advantages of having a great credit score is that you can use it to get better insurance rates. Insurance companies use your creditworthiness to determine what your premium is going to be, and the higher your FICO number is, the lower premium you’re going to have to pay.
So, if you’ve been on the same insurance plan for a long time, and you have a great credit score, you should consider shopping around for another one. You’ll probably be able to find the exact same coverage on your home or car or life insurance plan or whatever but at a lower rate. And you know what that means: savings, baby!
If you want to stay with the same provider, it’s still worth asking around and getting quotes from other companies. If those quotes are lower than what you’re currently paying, you can take them to your current insurance company and say, “Hey, pal, check this out. I need you to match or beat this number, or my business is as good as gone!” Alright, maybe you should say it a little nicer than that, but you get the point.
The next way to leverage your credit score is to get more credit cards! But, be careful with this one!
Get Credit Card Bonuses
Alright, I must warn you. If you somehow got a good credit score by luck and you aren’t actually that fiscally responsible, don’t open more credit cards to get bonuses. Lots of credit card companies try to dangle a carrot in front of your face with flashy rewards offerings, but if you don’t remember to pay the balance all the way down each month, rewards cards are going to become a money pit.
However, if you have a great credit score, you naturally get the best rewards offerings, and sometimes these can be a great deal! Maybe you open a card with travel rewards, and you meet the card’s minimum spending requirements every month, and you remember to pay the balance off. Then you might just find yourself on a free flight to Japan in a year or two.
But, think critically about going for these rewards programs, particularly if they have an annual fee. The calculation should be something like this:
With the minimum spending limit, I’ll earn enough points every month to get a flight to Japan in two years. The value of a flight to Japan is $800. Each year, the annual fee is $200, so I’ll pay $400 over those two years. Pretty much, you’re paying $400 in fees to get an $800 plane ticket. That’s a good deal right there!
However, if the annual fee is more than the value of the rewards you’re going to get, slap that credit card out of your face, or just don’t sign the dotted line. A lot of companies may try to scam you with rewards cards, but if you have a stellar credit score, it’s so much easier to find an actually good deal.
But, getting a credit card obviously isn’t just about rewards, we have to consider the interest rate and the limit too! And if you just recently found out you have a good credit score, you may be able to get a credit card that’s way better than the one you’re currently using.
Lower APR and Higher Limits
If you’ve been using the same credit card with the same interest and the same limit for years, it’s time to look into opening a new credit account. You might just be able to get a new credit card with a lower interest rate, which is just another way of saying you’ll have to pay less money. Who doesn’t like that?
You might also be able to get a card with a higher limit, which means you have the option to borrow more money if you ever need it. Even if you don’t plan on ever letting your balance go near that limit, it’s a good safety net in case you have to borrow some money to pay for emergencies.
Plus, with a higher limit, you can more easily stay under the 30% rule! Don’t know what that is? Well, keeping your credit balance below 30% of your limit is the best way to keep your credit score high, and with a higher limit, that just gets a whole lot easier.
So, go look around for a new card with lower interest and a higher limit. You might be surprised what you can get approved for. Oh, what’s that? You don’t want to complicate things by opening another credit account? Alright, go to your current credit card company with a copy of your credit score, and ask for lower rates! Ask for a higher limit! Do some negotiating! They want to keep your business, and if giving you a better credit card is what’s going to keep you with them, they’re probably going to do it.
Having a higher credit card limit is a good way to know that you have money available on credit for emergencies. But, if you really want to have peace of mind about unforeseen circumstances, and you have a home and a high credit score, you should think about applying for a HELOC.
Open a Safety HELOC
What the hell is a HELOC? It kind of sounds like a supervillain from an old cartoon or something. But, in fact, HELOC stands for “home equity line of credit,” which is basically when you use your equity in your home as collateral for a line of credit. So, this really only applies if you already have a mortgage.
Your equity in your home is the difference between your home’s total value and your mortgage balance. You can use the value of that equity to open what’s called a “rolling line of credit,” which is a lot like a credit card. Basically, you can get a loan for however much might you might need under a certain limit.
Lenders typically require you to have 20% to 30% equity in your home along with a good credit score to do this, and they’ll then set your credit limit at 85% of that equity value. If you’re not following, don’t worry, here’s an example:
You have a mortgage on a house worth $100,000. You’ve paid $30,000 of that mortgage, so your equity is $30,000, or 30%. You go to the bank and ask for a HELOC. They say, “Hell yeah, HELOC away, my friend,” and give you a rolling line of credit for 85% of your equity. That means you can borrow up to $25,500 whenever you want. What happens if you fail to pay that off? Well, your equity was put up as collateral, so the bank can take your home. Bummer.
Now, that doesn’t sound great, but having a HELOC is actually a fantastic safety net if you fall on hard times. Let’s say you really need to pay some unforeseen medical bills, or you need to pay your cousin’s bail because he robbed another convenience store. Jeez, what’s his problem? Well, you can access the cash that you need by going to your HELOC.
Should it take the place of your emergency fund? Not necessarily. But, it’s a great way to get some peace of mind and know that the money’s there if you ever need it. But, first things first, you need a good credit score to get one of these.
Alright, all this talk about securing lines of credit for emergencies is beginning to get a bit depressing. Let’s talk about how you can use your high credit score to get filthy rich while doing something you love.
Start a Business
You have a great credit score, which means you can get good rates on your credit cards, your mortgage, your auto loan, and all that. But did you know that if you’re looking for a loan to start a business, the first thing they check is your personal credit score? That’s right.
Seriously, if you’ve been thinking about starting a business, pat yourself on the back for keeping your credit score high, because that’s going to make it so much easier for your business to succeed. So, start talking to business lenders and open that restaurant, sell that jewelry, go buy a car wash, or whatever. The world is your oyster with that good credit score.
If you just realized you have a great credit score, and you have a killer idea for a business, even if it’s just a side business to make some extra income, now is the time to do it! You’ll be able to secure that all-important start-up money way easier and at a way lower rate with that great credit score of yours. And that’s regardless of whether you’re getting a loan from the bank, from venture capitalists, from angel investors, or from your uncle Donny, if he knows to check your credit score, that is.