Are You Selling Your Credit Score?

By Pinyo, on March 20, 2008

I knew that applying for too many credit cards could adversely effect on my credit score. However, the concept wasn’t picture perfect until I read Rocket Finance’s story where he said, “we traded our credit score of 748 at it’s highest point in exchange for favor from credit card companies.”

How Did I Sell My Credit Score?

I am not above this pitfall either; however, not all of them were bad trades. Here is some of what I have done:

10% Off — Guilty! I have signed up for many store cards at Macy*s, Target, Saks Fifth Avenue, etc. The only worthwhile one was Home Depot card where I got 10% off a $3,000 purchase with no interest and no payment for 12 months
Mileage for Air Travel – My wife and I got Citibank Premiere Card for our trip to Thailand. In hindsight, we should have used our existing Discover Card or Citi Dividend Card.
No-Fee for International Transactions — Did you know that most credit card companies charge 3% fee for international transactions? Well, my wife and I found one from Commerce Bank that offers no-fee for international transactions. Another good trade in my opinion.

Other Ways To Sell Your Credit Score

I believe that’s all I have done as far as selling my credit score. But there are other ways:

Free t-shirt, pen, mug, etc.
Cash bonus
0% Introductory rate
0%, no fee transfer

I am sure there are other creative ones.

Is It Bad To Sell Your Credit Score?

I guess the answer is depends. In case of Rocket Finance, I think it isn’t so bad. After all, he got $5,000 through sign up bonuses and credit card arbitrage — enough to balance his budget. However, it could be bad if you are planning to do something that depends on your credit score — i.e., take out a home mortgage. In general, there are two types of trade that I think are worthwhile:

1. Leverage 0% Introductory Rate to Reduce Interest Expenses

I mentioned this strategy in 7 Steps Debt Reduction Illustrated, where I said it make sense if you could transfer balances from high interest credit cards to credit cards that offer no-fee 0% APR transfer to save you money. For example, these cards offer no-fee 0% APR transfer:

2. Leverage Cash Back Rewards

I am also a big fan of getting money back by using reward card, as mentioned in 40 Alternative Income Ideas and Resources. There is nothing wrong with using credit cards if you pay off the balances in full each month. Some cards that offer cash back reward include:

When it comes to credit cards, I believe the key is to pay them off in full each month so that you don’t have to pay any fee. If you can manage this, then credit cards are great for collecting cash back rewards and other bonuses. They are also safer than cash and debit cards when you travel. And lastly, they could act as your emergency cash reserve if needed.

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Pinyo is the brain behind Moolanomy personal finance blog and a few other web sites. If you like this article, please subscribe for free daily email updates.

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10 Comments

plonkee
March 20, 2008, 6:52

I am willing to trade my credit score for rewards. Previously I have bagged 11500 Sony points – enough for an MP3 player or 11 cds – and a £15 Amazon voucher. Not amazing rewards, but not bad since I have a good credit score anyway. I’m planning to remortgage my house in about a years time, so I need to be careful what I do now.
Patrick
March 20, 2008, 9:52

I got a few t-shirts in college, but I was responsible with the cards. Now, I investigate the cards and if the card is good and there is a $100 bonus or so, then I will think about it. But I don’t do it often.
My Dollar Plan
March 20, 2008, 10:35

I’m very careful about our credit score, even with the huge credit card arbitrage. It takes a hit the first month, but other than that, it remains strong.
Aaron Stroud
March 20, 2008, 11:44

There comes a point when all your credit score is good for is trading it for rewards .

Of course, a decent score is important to insurance. But beyond that, it’s not good for much if you won’t be borrowing money again.
Mrs. Micah
March 20, 2008, 16:29

The power of the score is, as Aaron says, the power to borrow (or do a few other things) so at some point you might as well redeem those points. No one will care what it is when you’re dead.

But you’re quite right that since it’s a valuable currency we should be careful what we actually spend it on.
Know The Ledge
March 20, 2008, 20:16

Reading about selling your credit for a t-shirt brings back some bad memories of getting my first credit card in college for a cheap screen printed beefy T. Oh man, I’ve come a long way.
Lisa
March 21, 2008, 5:27

I pay my credit cards off fully every month. It’s the only way to go.

I’ve also made $250 this year on credit card sign up bonuses. I suppose I should feel guilty. Nah! Those credit card companies often use misleading advertising and gimmicks to take advantage of unsuspecting people. Good to get them back!

Lisa
Pinyo
March 21, 2008, 8:23

@Plonkee – Does credit score works the same way in England? How’s the mortgage rate now? I am just curious about your timeframe.

@Patrick – I don’t think I ever signed up for a T-Shirt. I think $100 may be worthwhile — depending on your situation.

@My Dollar Plan – I don’t know how you do it with all your credit cards, but you must have really strong credit history, or a family member in each of the credit agencies

@Aaron – True to a degree — more and more companies are using this as a guage — i.e., if you switch job, trying to get better insurance rate, etc.

Although I do agree that trading it for rewards might be the best option for some people.

@List – That’s great about paying off in full every month. I don’t know if I would turn down $250 either.
straightener
September 2, 2009, 3:31

I’m very careful about our credit score, even with the huge credit card arbitrage.
But you’re quite right that since it’s a valuable currency we should be careful what we actually spend it on.
shiying
October 7, 2009, 21:31

I like the post, and I agree somewhat with, To be very truthful.

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