If you’ve got great credit — congratulations!
But with great credit comes great responsibility.
What I mean is you want to continue to do the things that built up your credit score in the first place. And in many cases, you’ll actually want to step up your efforts — because when you start wielding your great credit, you’ll take on responsibilities and debts that will drive it back down.
Once your credit score passes 780 or so (out of a possible 850), a whole world of possibilities opens up.
Today, we’re going to look at those possibilities. And I’ll show you the best ways to use your great credit.
Not only to save money on things like interest rates. But to make money with wise investments, as well.
Enough teasing — let’s get started.
Great Credit Use #1: Big Purchases
Getting a good rate on large interest-based purchases is often the entire reason you want great credit in the first place.
With your powerful credit score, you can get the lowest rate on mortgages — and access to some mortgage options that aren’t available to those with bad credit.
Now’s the time to buy a house… or refinance one, if you bought it a while ago when your credit wasn’t as good.
Now’s the time to trade in your jalopy for a new car… or, even better, a lightly used one that already suffered the big drop in value when it was initially driven off the lot.
You only want to make these kinds of purchases — anything large that you’ll pay off over time — when your credit is north of 780.
Whether you’re getting a new work computer, a bedroom set or an investment property in Cabo… Great Credit Use #2: Get the Best Credit Cards it while your credit is high.
Great Credit Use #2: Get the Best Credit Cards
You don’t have to look very far to find great credit card deals touted across the internet.
The sorts of deals that come with a ton of perks, including (but not limited to) bonus points or travel miles and benefits like sponsored Global Entry fees, access to travel lounges or free upgrades at certain hotels.
Exactly which credit card perks appeal most is a personal choice — you’ll have to decide for yourself. But now’s the time to decide.
Because many of the best credit cards aren’t available to those with weak credit. When you have strong credit, though, you can get your pick of the litter.
It’s true — your credit score will take a minor dip when you apply for new credit cards. You’ll get a credit inquiry ping — which has a minor negative effect on your score — and the average age of your credit history will dip.
Offsetting that, you’ll be adding a new account and increasing your credit line — both of which have positive effects. And consequently, you’re likely decreasing your credit utilization — the percent of your overall credit that’s currently owed as debt.
Decreasing credit utilization has a large positive effect. So though you might see a small dip from getting new credit cards, that will be offset in time.
To help speed up that process — and give you room to take advantage of the next credit use — call up your current credit cards and ask for an increase in your credit line. (In many cases, you can do this online.)
With a strong credit score, most cards will be only too happy to increase your credit line. That will help you keep utilization down — an important thing with our next move.
Great Credit Use #3: Leverage Your Credit
I want to be very clear — this is a great strategy, but only if you handle it responsibly.
If you aren’t sure you can trust yourself to keep track of everything, it’s a great way to lose money. So know your own abilities before you try this.
Caveat aside, here’s one of the most powerful ways to use a great credit score…
Take on some debt.
But not just any debt.
What you want to do is use a credit card that has a great balance transfer or cash advance offer.
With a great credit score, you’ll probably be able to find one that charges 0% interest for 12 or 18 months and a flat 3% transfer fee when you first take on the debt.
Then take that money and put it into a financial instrument you know will make more than 3%.
Here’s an example… Say you loan yourself $10,000 using a credit card advance offer with a 3% transfer fee. That $10,000 will cost you $300.
But if you take that $10,000 and invest it in tax liens paying 18%, you’ll earn $1,800 in a year.
Take away the $300 transfer fee and you’re still up $1,500. That’s money you’ve made — free and clear — for doing nothing more than wisely investing a personal loan.
Again, you have to be careful with this sort of move. Your credit card utilization will go up, which will immediately hurt your credit score (though it will return to normal once you’ve paid off the balance). So you don’t want to overuse this strategy.
Likewise, even though you won’t have any interest on your balance for 12 or 18 months, most credit cards will still require minimum payments on your debt. If you miss one, the penalties can quickly erase your earnings.
Not to mention — your credit score will plummet.
But if you pay the minimum each month… keep track of the loan you gave yourself… and make sure you pay it off before interest kicks in (and it usually retroactively applies interest for the interest-free months if you haven’t paid off your debt in full)… and wisely invest the money in something that more than covers your transfer fee…
Well, this is a completely free way to make money.
Once you’ve got that money, you can turn around and invest it in things that pay off even more, but over a longer period of time — like stamps, coins or other rare tangible assets.
It’s a no-lose situation. But only if you can be responsible. Miss your payoff date or get stuck with full interest and you’ll start losing money, not making it.
But having great credit suggests you can be responsible. So take advantage of your maturity and grab some free cash for yourself.
It will be well worth the temporary dip in your credit (as long as you don’t have any major purchases on the horizon). And once you’ve completed the cycle, you can do it again.
It’s a nice way to add a few thousand dollars to your pocket every year for nothing more than responsible calendar keeping.
And that’s a bargain if I’ve ever seen one.
Editor-in-chief, Unconventional Wealth
P.S. Not sure where to find the best credit cards for perks or balance transfers? Bearing in mind the advice I’ve given today is from me — and not from the banks that offer these credit cards — you can find a great list of the best offers today right here.
Ryan Cole is the editor-in-chief of Unconventional Wealth. He’s been covering the alternative investment space for nearly a decade and writing about finance and investment for almost 20 years.
Ryan has walked the walk for years, living a very unconventional life. He’s led snowmobile tours through the mountains of Colorado, settled in Japan for five...