8 things a better credit score can buy

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By Liz Pulliam Weston stolen from MSN

You've had credit problems, but you've worked hard to repair the damage, scrimping where you could, restraining your impulses and mailing every bill early. Now what?

For one thing, you'll have an easier time borrowing more money. But you could also use your newfound status to lower your bills. Credit scores, those three-digit numbers that lenders use to gauge your creditworthiness, can affect everything from what you drive to where you work.

Fixing your credit is a big job. If you're still working on it, you'll find credit-burnishing tips in "7 fast fixes for your credit score" or in my book "Your Credit Score: How to Fix, Improve, and Protect the 3-Digit Number That Shapes Your Financial Future."

But if you've just rescued your credit rating from the basement, it's time to put your newfound clout to good use.

Call your credit card companies
If you still carry credit card balances, your improved scores may entitle you to lower rates that can help you reduce your financing costs and pay off the balances more quickly.

Don't expect your credit card issuers to volunteer lower rates, though. You'll have to negotiate for them and be willing to transfer your balances to other cards if necessary.

You'll find a detailed game plan in "Get a better deal . . . with a threat." If you've been sent low-rate offers in the mail, have those on hand when you call your card issuers and ask them to match the offered rates.

Remember that you'll have the most leverage if your FICO credit scores are 700 or above. (If you're not sure where you stand, you can use MSN Money's Credit Score Estimator to get a potential range.)

Even if you don't carry balances, you'll probably want to look around at MSN Money's Credit Card Analyzer and other sites, including CardRatings.com, to see if you can get better cards. Credit cards for people with poor credit often come with high fees and less-than-attractive terms. Be cautious about closing old accounts, however, since doing so can ding your scores.

Call your insurance companies
In most states, insurers are allowed to use credit information to determine customers' premiums. (Read "How bad credit costs you with insurers" and "Is your insurer discriminating against you?" for details.) If your scores have improved, you may be able to win breaks on your auto and homeowners coverage.

Of course, your state may not allow insurers to use credit information; California and Massachusetts ban the practice, while several other states impose restrictions. Still, it could be worth a phone call to find out if your premiums have been affected by your credit.

If your insurer happens to be one that doesn't use credit as a factor, you might want to consider shopping for one that does. Why? Your newly burnished scores could entitle you to lower premiums at a company that rewards good credit.

But theres a catch
The catch: You typically have to have some equity in your home or car to convince a lender to replace your current loan with a better one. That means you have to owe less than your car or home is worth.

If that's the case, though, contact your current lender to see if you can get a better deal. Also shop around with other lenders, including your local credit union, but do so in a concentrated period of time. Auto- or mortgage-related credit inquiries made within a short period of time -- typically 45 days -- are counted as one inquiry and won't have much impact on your scores, but if you drag the process out for months you could do damage to your numbers.

See if a mortgage refinance makes sense
A big jump in your scores can also qualify you for a better rate on your primary home loan, depending on when you got your mortgage.

You can get rate quotes from a number of sites, although be aware that you may have to give out credit information and authorize inquiries to your credit reports. A new site, FreeRateSearch.com, conducts such searches based on the scores you provide without making a formal credit inquiry.

Even if you can get a better rate, though, refinancing might not make sense if you won't be in the house long enough to offset the costs involved in getting a new loan. The mortgage refinance calculator at Bankrate.com can help you crunch the numbers to see if a new loan makes sense.

And you could also . . .

Look for a new place to live
If you rent, your ability to find a decent apartment could have been impaired by your bad credit. Folks with poor credit often wind up with less-desirable housing or pay larger deposits than those with pristine credit histories. With good credit scores, though, the apartment world is your oyster.

If you don't want to move, you could always ask your landlord if he or she would be willing to return part of your deposit.

Look for a better job
Employers typically don't look at credit scores alone -- they usually review condensed versions of your credit reports. But significant problems with credit can prevent you from getting jobs that involve working with money or that require security clearances from the government.

If your credit problems are now well in the past, or if they've fallen off your credit reports entirely (as they typically do after seven years, or 10 years for bankruptcy), your employment prospects may have improved.

Contact your utilities and phone carriers
Phone companies and utilities that provide electricity, gas, water and other services often require substantial deposits from people with poor credit. It doesn't hurt to ask for the money back when your credit improves, although the company may not comply.

Your best hope for a returned deposit may be from phone and wireless carriers who are concerned about losing you to competitors. If nothing else, you can get your wireless deposit back when your contact is up and you switch service.

Be prepared for collectors' calls
Credit card companies hunting for new customers aren't the only ones surfing your credit reports. Collection agencies may be looking as well, hoping your financial situation has improved enough to pay them. If you have old debts that could come back to haunt you, read "When paying old bills can hurt your credit" and "Is there a statute of limitations on debt?" Then:

Review your federal and state rights. Start with the Fair Debt Collection section on the Federal Trade Commission site.

Make sure the debt is really yours. Unethical collectors know some people will pay a bill that isn't theirs, just to prevent further damage to their credit. Demand proof, such as a copy of a bill or a signed contract.

Make a deal. When you negotiate an old debt, ask the collector to promise in advance and in writing to remove the collection account from your credit reports. Although most damage to credit scores is done when an account first goes delinquent and then is charged off by the original creditor, collection accounts certainly don't help scores. Getting them off your report may improve your numbers.


Consider refinancing auto and home-equity loans
These two types of lending are among the most strongly influenced by credit scores, so better credit can win you dramatically better rates.

Someone with excellent credit scores of 750 or above, for example, could qualify for a rate under 9% for a $50,000 home-equity loan. Someone with scores 100 points lower, by contrast, might pay a rate 3 percentage points higher, according to MyFico.com. The difference in monthly payments would exceed $90 a month on a 15-year loan.

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