8 things better credit scores can buy

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. And in the current climate of falling home values, that might be tough.

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 out the process 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. The 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 after a 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 contract 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.

Liz Pulliam Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "Your Credit Score: Your Money & What's at Stake." Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board.

Updated March 10, 2009

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