Can one make money arbitraging an excellent FICO score?

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almon_IHB

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can people who have excellent FICO scores arbitrage them to make money? i'm referring to totally or almost riskfree transactions, so becoming a loan shark to subprime borrowers doesn't count
 
this occurred to me when i started thinking, "having a high FICO score can save you money, but unless you're buying a house, you can't really generate positive cashflow with it." so the next question was, "how can i generate positive cashflow using a FICO score?"





but maybe there is something here: say IR's FICO score is 825, and mine is 600. i need a loan, but a 30-yr fixed is 9.25% for me and IR can get the same loan for 7.25% (as a 2nd residence). so IR becomes my banker and lends to me @ 9.0%, for a spread of 175 basis points. now if IR can buy some sort of PMI insurance (i know it doesn't exist, but let's just talk theory) for under 175 basis points, then IR has positive cashflow.





i wished i had a fail-proof idea, IR. but you know, conceptually, this is just a credit default swap.
 
eff - what's "renting AU tradelines"? is that buying funds with NAVs cut in australia but invested heavily in another time zone?
 
<p>Adding someone to one of your revolving accounts as an "authorized user" will sometimes make the corresponding tradeline from <strong>your</strong> credit history appear on <strong>their</strong> credit report. The FICO scoring model treated this tradeline as their own. I think (but do not know) that this "oversight" has been corrected. </p>
 
funny you say that - i just read in Smart Money that adding your children as authorized users on credit cards used to help their FICO score, but fair isaac's 2008 model eliminates that hole. is this what you're referring to?
 
<p>It might work between spouses. All of the credit is in the name of the one with the highest FICO score, thus reducing the total cost to the couple.</p>

<p> </p>
 
There were companies that would pay people to rent out those AU tradelines for a few months at a time. The idea was that a marginal borrower could get a nice FICO bump from having that tradeline appear on their credit report. The borrower pays the company, the company pays you.
 
See <a href="http://www.latimes.com/business/la-fi-score8dec08,1,2704223.story?coll=la-headlines-business">this</a> LA Times article about TradeLine Solutions Inc.
 
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