Building Credit Basics

How to Get Approved for Your First Chase Credit Card

It's no secret that JPMorgan  Chase has some of the best credit cards out there for travel. If you're just starting out on your credit journey, then I recommend building a relationship with  Chase as soon as possible to start earning points.

Below is a general roadmap of how to get approved for your first  Chase credit card.

Phase 1: Apply for the  Chase Freedom Unlimited® or  Chase Freedom Flex®

The  Chase Freedom cards are entry-level cards that earns 5% cash back on travel purchased through  Chase Ultimate Rewards and 3% on drugstore purchases and dining at restaurants. Save up the Ultimate Reward points to redeem for travel when you get a premium credit card.

There are a few scenarios:
    a) if approved for the  Chase Freedom Unlimited or  Chase Freedom Flex= move to Phase 3
    b) if no answer = move to Phase 1.5
    c) if rejected = move to Phase 2


Phase 1.5: Call the backdoor number and talk to a credit analyst

If you don't automatically get rejected for a  Chase Freedom card, then call and talk to a credit analyst to explain your financial situation.

a) if approved = move to Phase 3
b) if rejected = move to Phase 2

Phase 2: Apply for the Slate card

If you get rejected for the  Chase Freedom card, then try applying for the  Chase Slate card on the same day to combine hard inquiries. When you apply for the  Chase Freedom and  Chase Slate online on the same day, it should only be 1 inquiry. YMMV.    

The  Chase Slate card can be product changed to a  Chase Freedom card after a few months.

a) if approved = move to Phase 1 or Phase 3
b) if rejected = get 700+ score by getting a secured card or dramatically increase your credit score and have a credit history of at least 6-12 months. Wait another 3-6 months to apply again (Phase 1 or Phase 2)

Phase 3:  Chase Freedom Unlimited /  Chase Sapphire Preferred /  Chase Sapphire Reserve / Other  Chase Cards

After you build a relationship with  Chase via the  Chase Freedom Flex or  Chase Freedom Unlimited card, wait 3-9 months before applying for another  Chase card.

I usually recommend going for the Chase Trifecta, which consists of the  Chase Freedom Flex,  Chase Freedom Unlimited, and the  Chase Sapphire Reserve® or the  Chase Sapphire Preferred® Card.


How to Get a Perfect 850 Credit Score: A Step-by-Step Guide

We recently published a post about why an 850 score doesn't matter, but ironically, the most common question we received was how to achieve an 850.

Today, we'll walk through all the variables that affect your credit score and how to optimize around it.

As a reminder, your credit score is based on 6 different factors:

If you haven't checked your credit score recently, Credit Karma is a free resource. A lot of credit card companies like American Express, Discover, and Citi offer free credit reports within your account portal.

The breakdown:

  • Utilization = 30%
  • Payment history and derogatory marks = 35%
  • Average age of accounts = 15%
  • Total accounts = 10%
  • Credit inquiries = 10%

To score an 850, you need to score excellent in each category.


Stay in the 0-9% range. Let's say you have a credit card with a $1,000 credit limit, and your statement is at the end of the month. If you wait until the end of the month to pay it off, it affects your utilization.

A good way to lower utilization without changing your spending habits is to pay off your balance before the statement closes.

If you do pre-pay your balance, don't zero out your utilization. Leave a small balance to pay off when the statement closes to have a balance due to reflect in the payment history.

Pre-paying your cards may seem unnecessary, but I think it makes sense because you're aware of your spending habits.

If you are someone who carries a balance every month, look at your expenses and try to see what you can cut back on.

Payment History

You need a 100% to score "Excellent." Payment history is relatively straightforward: pay your bills on time. Payment history can be hard if you missed payments in the past. As long as you pay the minimum balance required for the credit card, you'll be okay for this category.

If you miss one payment, then it already brings down the payment score to "Good."

On time payments
_______________________ = Payment history
Total number of payments

The problem with having only one credit card is that missing one payment puts you in "poor payment history": 23 on time payments/24 total payments = 96% (Very poor).

This means that a mistake you made two years ago is going to impact you today if you have one card. Even in the third year, the missed payment will still impact you. Only after the third year does the credit score recover: 35 on time payments/36 total payments = 97% (Poor)

If you run through the situation with five cards instead of 1 card, it's more forgiving:

59 on time payments/60 total number of payments = 98% (Fair)

The main takeaway is not to miss any payments. If you do miss a payment, you can get more credit cards to offset the damage (pay them off in full).

A good way to make sure you don't miss any payments is to automate them. You can choose to pay the card off in full or pay the minimum.

Derogatory Marks

Defaulting on a credit card is an easy way to destroy your credit score, as well as any banking relationships. For example, if you default on a card from an issuer, you might not be able to receive any other products from them. They could also end their banking relationship with you as well.

Unlike payment history, this is easier to fix. You may be able to negotiate a payment plan with the bank to get back on track.

Average Age of Credit History, Total Accounts, and Credit Inquiries

Average age of accounts: the higher is better. You should aim for 9+ years to score "Excellent."

Total accounts: You need 21+ accounts to score "Excellent." If you have 20 cards and low utilization, you're seen as more responsible to the credit agencies. I do realize that 21+ cards sound ridiculous, but hey, I don't make up the rules.

Credit Inquiries: Specifically hard inquiries whenever you apply for a new credit card. When you rent a house, and they run a credit check, that's a soft inquiry. Applying for a credit card or a car loan is a hard inquiry because you're going to accumulate debt. The interesting thing about credit inquiries is they fall off your report after two years.

For example, if I apply for 20 credit cards in one year, that's 20 inquiries. After two years, they fall off like they weren't there in the first place.

These three factors work together. You can take an approach to take one step back to take ten steps forward in the future.

How to achieve a perfect 850 credit score

If you're going after the 850 (again, a perfect score doesn't matter), then you'll want to get 21 credit cards as soon as possible and wait. You'll take 21 inquiries right away, which will pull your credit score down for the next two years. After the two year mark, all the inquiries will fall off.

With your 21 credit cards, be sure you don't miss any payments. Utilization wouldn't matter because you can fix that in the future. Set the 21 credit cards aside for nine years to factor into the average age of accounts.

Starting at the 8-year mark, be sure your utilization is low. Most likely, you are a financially responsible person if you can get approved for 21 cards.

At the nine year mark, you'll have a low utilization, 100% payment history, 0 derogatory marks, 9+ average age of accounts, 21+ total accounts, and 0 inquiries. It's like baking an elaborate birthday cake that you have to wait nine years to eat.

The big question: What do you get for having an 850 credit score?
Answer: Nothing. You'll receive the same benefits and interest rates as someone with a 750 credit score.

YouTube Video


How to Aggressively Increase Your Credit Score (Short Term Strategy)

One of the questions we get asked frequently is, “How can I increase my credit score?”

We have a lot of content about different credit cards and how to optimize them, so how do you increase your credit score in the short term to qualify for premium cards?

To increase your credit score, you have to understand what factors drive them.

What is your credit score?

We’re going to use a free resource, to check your credit score. Most services tell you what your score is, but they don’t show you which variables affect your score in detail.
If you’re not familiar with Credit Karma, they’re a tool that gives you your credit score for free. Are they legitimate? They’ve raised hundreds of millions of dollars from venture capital firms and have a valuation in the BILLIONS.

For a quick summary, this is how credit agencies grade you. Credit Karma conveniently shows you these things as well:

  • Credit card utilization = total credit card balances / your total credit card limits
  • On-time payment percentage = your on-time payments / your total payments
  • Derogatory marks = open accounts in collections + negative public records marks
  • Age of credit = average age of all open credit accounts
  • Total accounts = open accounts + closed accounts
  • Credit inquiries = hard pulls (credit cards, some banks, and Comcast)

If you want to rapidly, and aggressively build your credit, you need to focus on the things you can control.

Also, you should make sure you focus on the high impact factors.

The three high impact areas are:

  1. Credit card utilization
  2. Payment history
  3. Derogatory marks

Credit Card Utilization

A lot of people choose to wait until their statements come to pay their bill. This makes sense because you don’t owe interest on it until after the payment due date, so why would you pay early? The simple reason is that your goal here is to increase your credit score drastically and a big factor is utilization.

Again, utilization is total credit card balance / total credit card limits. So if you have a $500 limit and you spend $200, you’re at 40% utilization. That’s in the fair zone. Not bad per say, but not great. This is especially true if you have the money to pay for it anyways.

My strategy is to pay off your credit card every few days; this ensures that utilization stays at the excellent range (you can keep the balance at $1 if you’re worried that they won’t report your $0 balance to the credit agencies). Let’s say my balance after a week is $100 from groceries and lunches. I’ll pay that off BEFORE my statement even comes to keep my utilization near 0%. This has the dual benefit of ensuring that your payment history category doesn’t get screwed up.

This strategy alone helped my credit score skyrocket from 0 to 760, all in less than a year.

Payment History

This seems pretty straightforward but PAY YOUR BILLS. Even one missed payment can negatively affect your credit for a long time. For example, if you have one card with six months of history (you’re 6/6!). If you miss a payment in month 7, you’ll be 6/7. Or 85.7%. This instantly puts you in the “very poor” category for a high impact category and can make it extremely difficult to establish your credit.

Ways around this are to set up auto pay, set calendar reminders to pay your bills, or to pre-pay. I would recommend pre-paying to remove this risk (more on this below).

If you have missed a payment, I would contact your bank to see if you can get it removed. Some banks will do it as a courtesy once they get paid. If you get a hit, you have nothing to lose.

Derogatory Marks

To reiterate the first sentence from payment history… PAY YOUR BILLS.

If you’re an international, this shouldn’t be a problem area for you since you wouldn’t have had the chance to default on a loan previously.

If you’re working to improve your credit, I would reach out to the bank and repay the loans. If you go the bankruptcy route, it takes seven years for the derogatory marks to disappear. Even then, you’ll likely have trouble getting another credit card or loan from that financial institution. It makes sense though, if you screwed Chase / Bank of America / whoever, out of $5,000, they have the right to not lend to you in the future.

Age of Credit

You have little control over this factor other than just waiting it out. If you’re an international, I would recommend that you keep yourself at one card because of Chase’s rules on credit cards.

Total Accounts

Total accounts are, again, a category you can’t control, and I wouldn’t worry too much about it.

Interestingly enough, a lot of people get this category confused. The average person assumes that someone with a lot of credit cards must have money troubles. While that might be true for some individuals, that’s not how credit agencies (and finance savvy individuals) view it. Instead, the idea is that the more credit cards you have, the better you must be at managing money. To get into the good category, you need 11–20 credit products.

Credit Inquiries

I would not be overly worried about this category since it’s part of the process. The primary concern is applying for cards you know you’ll get rejected for and rack up a ton of inquiries for no reason.

I’ve seen people who keep applying for premium credit products like the Chase Sapphire Reserve and get rejected. After asking them about what their credit looks like, they tell me they’re new to America and don’t have a credit file. These end up being pointless credit hits.

Tying It All Together

The secret to aggressively building your credit is simple: pay your credit cards off in full and keep the balance near zero. If you're new to credit, check out our post about how to choose a secured credit card.


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Chase Freedom Rise Review
Credit Cards

Embarking on your credit journey can be daunting. But with the Chase Freedom Rise card, you can make your first steps less intimidating and more rewarding. 

The Chase Freedom Rise card offers a variety of features to assist in building a solid credit foundation, making it perfect for newcomers to the world of credit. 

Chase Freedom Rise Key Features

  • No annual fee
  • 1.5% cash back on all purchases
  • Build your credit

For those making their first foray into the credit world, the Chase Freedom Rise card could be an invaluable tool. 

Let’s get into the details of the latest Chase credit card.

Who should get the Chase Freedom rise?

Launched on June 11, 2023, the Chase Freedom Rise card targets those starting their credit journey for the first time - whether you’re a student just dipping your toes into personal finance or someone finally ready to establish their credit history. 

This card isn’t about mending past credit mishaps. Instead, it’s for people starting from scratch and building a strong foundation.  

What does the Chase Freedom Rise offer?

Let’s break it down:

  1. No annual fee: There’s no yearly charge for using the card. Therefore, you can utilize the card’s benefits at no extra cost.
  2. 1.5% cash back: For every purchase you make, you earn 1.5% cash back. It’s a straightforward way to start earning while you spend.
  3. Rewards Points: You’ll receive cash back in the form of Chase Ultimate Rewards points. Redeem these points for cashback, gift cards, or travel. The choice is yours.
  4. $25 statement credit: If you sign up for automatic payments within the first three months f getting your card, you’ll receive a $25 statement credit. 
  5. Potential for credit limit increase: After just six months, you could receive a credit limit increase. Credit limit increases potentially boost your credit score and give you more financial flexibility. 
  6. Credit score tracking: With access to Chase Credit Journey, you can track your credit score and identify new ways to build it effectively. 

How can you boost your approval odds for the Chase Freedom Rise? 

Consider opening a Chase account and maintaining a balance of at least $250. While not a requirement, it can significantly improve your chances of getting approved for the Freedom Rise card. 

What’s happening with the Chase Freedom Student card?

The Chase Freedom Rise is the new face, replacing the Chase Freedom Student card for new applicants. But if you’re an existing Freedom student cardholder, no worries - your services will continue unchanged. 

Where can I apply for the Chase Freedom Rise? 

You can now apply for the Freedom Rise card only at Chase branches. The wait for online applications will be short, though - they are expected to be available in early 2024. 


The Chase Freedom Rise card strips away the complexities and offers a new straightforward credit card solution for those new to credit. 

It allows learning, building, and growing your credit score without unnecessary complications. If you value practicality and simplicity, this could be your card. Visit your nearest branch to start your credit journey.

YouTube Video

Why a Perfect 850 Credit Score Doesn't Matter
Credit Score

For a lot of people, their goal is to achieve a perfect credit score of 850. There are a few beliefs associated with a perfect credit score:

  1. You'll receive better interest rates for a mortgage, which is true (bear with me).
  2. Lower interest rates on your credit cards.


With mortgages, the rule of thumb is you need a 750 or above to get the best interest rates. These interest rates are crucial because adding a few points to an interest rate can translate to a few thousand dollars.

Even if you have a credit score of 800 or 820, you're still going to receive the same interest rate as someone with a score of 750. After consulting with a few experts in the space (my local bankers), they recommended a credit score between 720-740.

A good analogy for this is to imagine that you're in college and the highest test score in the class was an 89. Even if you scored a 90 or 100, it doesn't matter because the class would be graded on a bell curve. With a score of 89+, you're at already at the top of the class, and any number above will still grant a 4.0 GPA.

Credit Cards

The second reason people want to achieve a higher credit score is to receive lower credit card interest rates. In most cases, credit card interest rates shouldn't matter because you should not keep a balance on your credit card in the first place.

Factors that impact your credit score the most

The factors that impact your credit score the most are credit card utilization, payment history, and derogatory marks.

Factors that impact your credit score

What surprises most people about total number of accounts is 0-5 cards is considered very poor. Most people who have an 800+ credit score have 15+ credit cards.

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FICO Credit Score Changes and Why Your Score May Be Changing Soon
Credit Score

FICO recently announced huge changes to their latest credit scoring system, FICO Score 10. The new model will weigh heavier on consumer debt levels and personal loans. According to FICO, about 80 million people will see a shift of 20 points or more.

Most banks today are still using FICO 8 scoring system that was implemented in 2009. Below is a chart that illustrates what currently impacts your credit score.

The new FICO 10 system will roll out in Summer 2020, and most likely implemented in bank systems sometime in 2021.

How the FICO Score Changes Impact Your Credit Score

1. 24-Month Snapshot

The new FICO Score 10 will incorporate “trended data” for the past 24 months to see the historical credit behavior. A 24-month snapshot of credit behavior can be detrimental for those who don’t consistently pay off their debt.

On the other hand, if you show “good” credit behavior by paying off balances, then you’ll be rewarded with a higher score.

The idea is that instead of only seeing a one-month snapshot with the FICO 8 system, credit issuers can get a better idea of consumer behavior and de-risk.

2. Personal Loans

Life is unpredictable, and sometimes you need to take out a personal loan to cover unexpected expenses. I recommend paying off the personal loans as soon as possible.

The new FICO Score 10 system potentially “punishes” people who take out revolving loans.

Personal loans are typically broken into two categories, installment or revolving loans.

  • Installment loans = mortgage, car, and student loans
  • Revolving loans = credit cards and personal loans

Revolving loans will be weighed more heavily. One common scenario that credit issuers have faced is a consumer opening a credit card, and then taking out a personal loan to pay off the card. This can snowball into a cycle of debt.

If you’re someone playing the balance transfer game (I don’t recommend this), taking out a personal loan for a lower APR rate will dramatically lower your score. Most people who do this carry a balance on a credit card, transfer the balance to a new card that has a 12-month 0% APR promotion, and then pay off the card afterward.

With the 24-month snapshot, having a high balance on a credit card for 12 months looks like risky behavior.

How to Improve Your Credit Score

The good news is that the fundamentals of improving your credit score have stayed the same. The two high impact factors you can control are:

  • Credit Card Utilization (30%)
  • Payment History (35%)

Credit Card Utilization

Credit card utilization is how much available credit you use each month. I typically recommend keeping credit card utilization in the 1-5% range by pre-paying your bills.

Utilization = credit limit used / credit limit

If your total credit limit is $10,000 and you use $2,000, then utilization is 20%.

  • $2,000 used / $10,000 limit = 20% utilization

I recommend pre-paying $1,999 before the statement close date for the utilization snapshot to be low.

  • “$1 used” / $10,000 limit = ~1% utilization

For example:

  • A = Statement period: Dec 28-Jan 27
  • B = Statement closes: Jan 27
  • C = Payment is due: 15-25 days after B

Using the example above, if you spent $2,000 during Dec 28-Jan 20, you would pre-pay $1,999 by Jan 25, so your statement closes with a $1 balance on Jan 27. After Jan 27, pay off the $1 balance before the payment due date.

If you’re someone who can’t pay off the balance in full each month, I don’t recommend using credit cards. Carrying a balance each month will lower your score, especially with the new 24-month snapshot.

Payment History

Payment history is straight forward. Pay your bills on time, and you’ll be in a good spot. Missing one payment can put a dent in your credit score.

Payment history is calculated by on-time payments divided by total payments.

If you're new to credit and you miss a payment, then this will negatively impact your credit score.

  • 1 on-time payment / 2 total payments = 50%
  • 999 on-time payments / 1,000 total payments = 99.9%

Overall Thoughts

The fundamentals of how to maintain a good credit score remain the same: pay your bills on time, keep credit utilization low, and don’t take out personal loans unless you need to. Those who follow the simple guidelines are likely to see a score increase when the new FICO Score 10 is implemented.

How to Build Strong Credit Card Foundation for Your Credit History
Credit Cards

The reason why I recommend laying your credit score foundation with five cards is that you generally want more cards, as opposed to just one. I typically try to avoid cards with annual fees when building the base.

The problem

The most common problem I see is that when people are ready to buy a car or take out a mortgage, their credit file is too thin.

The solution to building a thicker credit profile is to add more no annual fee cards. Remember, you shouldn't be paying ANY interest.

The alternative solution is manual underwriting.

Benefits of having a strong base

  1. More cash back/rewards on normal spend
  2. "Free" travel
  3. Less impact on future applications
  4. Ability to close cards without the fear of your credit score dropping

How to start building a foundation

Secured credit cards

I recommend starting with a secured credit card or a student credit card to build a credit history.

Discover It secured or student cards are a good starting point because you can graduate to a Discover It with Cashback Match in the future.

Learn more about secured credit cards in this post.

After getting a secured credit card, wait 6-12 months before applying for another card. The main reason for this is so you can get cards affected by the  Chase 5/24 rule.

Cash back cards

The  Chase Freedom Flex card is a good starting point when you're ready for a starter credit card. If you get denied for the  Chase Freedom Flex, read this post on how to get approved for your first  Chase credit card.

If you want to earn unlimited cash back on everything, I recommend going for the Citi Double Cash (2% cash back; 1% at the time of purChase and 1% at the time of payment) or the  Chase Freedom Unlimited (1.5x points)

Gas and Groceries

If you want to optimize for gas and groceries, the American Express Blue Cash or the American Express EveryDay card are good options.

How to Increase Your Credit Score by Pre-Paying Your Credit Cards
Credit Cards

We've talked about how to increase your credit score in the short-term, and one of those methods is by keeping credit card utilization low.

What is credit card utilization?

Credit utilization is the ratio of your credit card limits to your balances. It's a percentage that reflects how much credit limit you use.

For example, if your credit limit is $1,000 and your balance is $100, then your credit utilization for that card is 10%.

Major credit issuers that report utilization using the statement date:

  • American Express
  • Bank of America
  • Barclays
  • Capital One
  • Chase
  • Citi
  • Discover
  • Wells Fargo

Depending on the credit issuer, most banks report credit utilization to the credit bureaus when the card statement closes. The only exception is U.S. Bank, who reports utilization on the first of each month.

If you want to keep it simple, you can call or secure message each credit issuer you have to adjust your statement date.

For example, if you want all of your credit card statements to close on the last day of the month, you can request it by calling the number on the back of your card.

Credit card utilization

Credit card utilization is one of the biggest factors impacting your credit score that you can control. By keeping utilization low, you can increase your score quickly.

How to keep card utilization low:

  1. Know when your card statement closing date is
  2. Pre-pay 99% of the balance before the statement closing date
  3. Wait for the statement to close, so it reports a 1% utilization
  4. Pay off the remaining balance

For most people, staying below 10% utilization is ideal.

0% vs. 1% Credit card utilization

I've seen arguments for keeping card utilization at 0% and 1%, and it depends on your situation.

If you have a thick credit profile with several years of credit history and more than five cards, then it's fine to keep utilization at 0%.

On the other hand, if you're new to credit or you have a thin credit profile, then stick to 1%. Some credit issuers won't report payment history if your statement balance is $0.

If you're someone who has missed a card payment in the past, then I recommend sticking with 1% so that credit issuers will report on-time payments.

Payment history

Payment history is calculated by on-time payments divided by total payments.

If you're new to credit and you miss a payment, then this will negatively impact your credit score.

  • 1 on-time payment / 2 total payments = 50%
  • 999 on-time payments / 1,000 total payments = 99.9%

Be sure to stick to the 1% credit utilization strategy if you've missed a payment in the past.

To avoid missing payments in the future, you can always setup auto-pay (if it makes sense for you).

Why You Shouldn't Ask for a Credit Limit Increase
Credit Limit

Note: Some of the offers/products mentioned below are no longer available.

To start off, when we're talking about credit limit increases, we're not referring to increases when the credit issuer automatically grants them. This post focuses on asking the credit issuer for a credit increase. Whenever you ask for a credit limit increase, you are taking a hard inquiry.

For some reason, a lot of people seem to get obsessed with getting increased credit limits. Some people like bragging about how they have a $100,000 credit limit with a $50,000 salary. There's not a good reason to have a limit that high.

The reason why I don't ask for credit limit increases is that I would rather take a hard inquiry to apply for a new credit card and have a signup bonus, as opposed to just raising my credit limit.

For example, if you have a Citi ThankYou Preferred card that has a $2,000 credit limit,  but you want to increase the credit limit to $7,000. If I apply for a new credit card, like the Citi ThankYou Premier card, then I might get approved for a $5,000 limit.

The great thing about applying for credit cards within the same bank is you can easily transfer credit limits by sending a secured message. Ask to transfer some of the credit from the new card (Citi ThankYou Preferred) to the old card (Citi ThankYou Premier).

If you think through the factors that impact your credit score, the following are usually reasons why people want to increase their credit limit:

  • Lower utilization
  • Higher ability to make large purchases

Lower Utilization

When you apply for a new credit card, you get the same benefits because you're getting more credit limit to lower utilization. You also get the benefit of increasing factors that affect your credit score like the average age of accounts and the total number of accounts.

The "cost" is still the same because you're taking a hard inquiry for a new card or an increased credit limit. At a certain point, it makes sense to stop searching for credit because it's seen as a higher risk to the bank.

Risk Profile

Ironically, I intentionally decrease my credit limits when I apply for new cards. At a certain point, you'll have a high credit limit where it doesn't make sense to keep asking for more because it'll be seen risky to the banks.

Most banks have a certain credit limit they're willing to give you based on your income. For example, if you make $50,000/year, some banks will issue you cumulative credit lines up to $50,000. Some banks will ask you to reallocate credit limits if you're reaching the maximum limit.

For me, this is why I intentionally decrease my credit limits. It doesn't make sense for me to keep increasing my credit limits when I don't foresee myself using it. If anything, having a high credit limit is detrimental for me because it makes obtaining new cards harder. I don't want to call the reconsideration line to move my credit limit around.

Whenever I get approved for a card, they usually issue a ~$20k limit. I immediately messaged the bank to lower the limit to $5,000-$10,000. There's nothing I buy that requires that high of a credit limit. Again, I don't keep a balance on my credit cards.

What do I mean that it decreases my risk to the bank? Let's say you make $100,000 and you have a $50,000 credit limit. Their biggest concern to the bank is someone defaulting on payments by running away or not being able to pay. They would rather have someone with a lot of cards and moderate credit limits, as opposed to someone with fewer cards and a large credit limit.

Just because you have a high credit limit doesn't mean they're not monitoring your activity.

The bank's ideal customer is someone who uses credit cards and doesn't pay the balance in full, meaning they are paying interest. The second ideal client is people who have a high number of transactions so they can profit from transaction fees. Making money off transaction fees is also lower risk for the banks.


The only situation where it makes sense to get a credit limit increase is if it's your first card and you don't want to apply for another one.

What to Do If You Miss a Credit Card Payment
Credit Cards

What to Do If You Miss a Credit Card Payment

One of the reasons why I wanted to do a post about this because there's a lot of misinformation out there about what to do when you miss a payment.

If you do miss a payment, you typically get a notification. The first thing you should do is log in to your account and make a minimum payment. Most banks don't report a missed payment until 30 days later.

For example, if the min payment was $25 by Aug 20, and I wait 30 days to pay it, that will be reported as a missed payment on your credit report.

As long as you pay off the bill, you'll be in a good position and not have to worry about it. Even if you make the payment online, you should still call in because they might waive the missed payment fees. Banks usually allocate $100 in waived fees for each client.

What happens If 30 days go by and you still don't pay the statement? In this case, the strategy is still the same, but you'll have a missed payment on your credit report. If this happens, I recommend aggressively cutting back on your budget so you can pay your bills.

Easy expenses to cut are alcohol, dining out, and entertainment. Expenses you can't downgrade are mortgage payments, phone bills, and the internet. I 'm biased because I need wifi to survive (it's my job!). The strategy is cutting out any unnecessary expenses.

What are things you shouldn't do?

The first piece of bad advice is to contest the late payment and say that it was fraudulent. The idea here is you can go to the credit agencies and say the charge shouldn't be there. It's kind of like doing a chargeback when you shouldn't in the first place.

The second bad piece of advice is to just default on the payment. Basically, forget that it exists and ignore anything related to the charges. The reason why this is a terrible choice is that this decision will affect you for the next 7-10 years. By defaulting on payments, you're destroying your relationship with the respective bank and destroying your credit report.

For example, if you defaulted on $10,000, the respective bank will no longer work with you because of the bad history. If you tried to apply for a credit card with them, you're likely to be automatically denied due to a non-satisfactory previous relationship.

If you do want to rebuild a relationship with the bank in the future, you would have to pay them what they lost (the defaulted amount).

The final piece of bad advice I hear is that you should pay off your debt in full, and then cancel all your credit cards. I understand the idea behind this, but it will harm your credit history. The main problem with this is that if you have a missed payment, it has a high impact on your credit score. Your payment history is based on total on time payments / total payments.

100% = Excellent
99% = Good
98% = Fair
97% = Poor
< 97% = Very Poor

The main issue of closing your account is you're not going to have any more payments moving forward. If you keep the card and you put a small amount ($5) on it each month, you can help improve your payment history.

Optimal Strategy

Given this, the optimal strategy, and this is counterintuitive, is to apply for another card (only if you can pay off your cards on time and in full). The benefit here is instead of the payment history being 12+12, it's going to be 24+24 because you have an additional card.

This means that your payment history, after one year, goes to 33 on time payments out of 34 = 97.1%. You might be thinking it doesn't seem that material, but it's a step in the right direction.

Another thing to consider is that the credit cards you're going to be approved for will be slim. Try to avoid cards that charge you an annual fee and no benefits. If this happens to you, there are still entry-level cards that you may be eligible for.

If your score is low, try to get a secured card. The secured cards typically cost $100-$500, but it's a deposit and not a fee. The benefit of a secured card is they usually get graduated to a regular credit card after one year, and they offer more benefits than a subprime card.

The whole idea is to take two steps back now and take three steps forward in the future. Subprime cards are the opposite. Yes, you do get a credit card, but in the long-term, it will drown you in fees without getting benefits.

When Should You Cancel Your Credit Cards?
Credit Cards

When Should You Cancel Your Credit Cards?

We walk through the different scenarios to see if it makes sense to cancel a credit card.

Annual fees

The first thing we have to consider is if the card has an annual fee. The worst case scenario is if you have an old credit card that has an annual fee and you don’t know what to do with it.

Can you product change the card?

My first suggestion is to product change the card, if available. An example of this is product changing a Chase Sapphire Preferred Card ($95 annual fee) to a Chase Freedom ($0 annual fee).

Another example of a card most people have after building credit is the Chase Slate card. Instead of canceling it after a few years, you can product change it to a Chase Freedom.

The second option is to see if you can break even on the annual fee. Some cards like the The Platinum Card from American Express have intangible benefits like concierge service. The Chase Sapphire Reserve has great travel insurance.

If you can’t break even on the annual fee or card benefits, it might make sense to cancel the card.

How to build your credit in the long run

Ideally, you want to keep all your credit cards because it will affect your credit score in the long-run.

Learn how closing credit cards in the video below:

Keeping your credit cards organized

If keeping track of physical credit cards is an issue, we recommend getting a card holder to keep them organized.

When to Cancel a Credit Card and Alternative Options
Credit Cards

When to Cancel a Credit Card and Alternative Options

One of the most frequently asked questions we get is, “should I cancel my credit card?” The answer: it depends. If the card doesn’t have an annual fee, I generally recommend keeping it since there’s no cost associated, and it keeps your credit history alive.

Depending on the credit journey stage you’re in, it might not be beneficial to cancel a credit card. Let’s walk through a few scenarios.

Thin Credit File / Early Game

Does canceling a credit card hurt your credit score? Canceling a credit card will impact the average age of accounts and number of accounts.

If you are starting in your credit journey with less than two years of credit history, I recommend keeping the card until you replace it with a new one.

What should you do with credit cards that have an annual fee?

There are a few options. If the card…

a) Has an annual fee and there’s a no-fee downgrade path
    = downgrade the card and keep

b) Has annual fee without a free downgrade path
   = build out a base for your credit (3/4/5 cards) and then cancel the card

c) Has no annual fee = keep


When you have a strong foundation of 3-5 credit cards and at least two years of credit history, canceling a card has less of an impact.

Should you cancel or product change the credit card?

There are a few options. If the card…

a) Has an annual fee and there’s a no-fee downgrade path
    = downgrade the card and keep

b) Has annual fee without a free downgrade path
   = cancel the card if you get negative expected value

c) Has no annual fee = keep

The mid-game is interesting because certain credit issuers like American Express limit you to only 5-6 credit cards at a time. If you want to add another Amex card, you’ll have to cancel one to make room.

You’ll have to decide which cards you’ll want to keep as a foundation, and which ones you don’t mind canceling.

End Game

For those with 5+ years of credit history, I recommend keeping your oldest cards since they are the foundation for your credit. Canceling one of your oldest cards can have a hard impact on the average age of accounts. Canceling newer cards will have little or no impact.

Should you cancel or product change the credit card?

There are a few options. If the card…

a) Has an annual fee and there’s a no-fee downgrade path
    = downgrade the card and keep OR do what you want

b) Has annual fee without a free downgrade path
   = cancel the card if you get negative expected value OR do what you want

c) Has no annual fee = keep OR do what you want

When there’s a solid foundation for your credit history, you can choose any path, and it will have little impact on your credit score.

Alternative Option to Canceling a Credit Card: Product Changing Credit Cards

If the credit card you want to cancel is more than 12 months old, I recommend looking into product changing the card to a no annual fee card (when possible). Product changing the card will keep your credit history alive, and the account numbers stay the same.

Chase Product Change Options

For example, if you have a Chase credit card and want to product change, there are a few options. Keep in mind that you can only product change within the same family of cards.

The following Chase cards have a no annual fee product change options.

Chase cards with downgrade paths:

  • Chase Sapphire Preferred
  • Chase Sapphire Reserve
  • United Explorer
  • United Club
  • Disney Premier

Chase cards with no annual fee:

  • Ultimate Rewards cards:
  • Chase Freedom
  • Chase Freedom Unlimited
  • Disney

American Express Product Change Options

American Express charge cards do not have any no annual fee product change options. Charge cards cannot be product changed to credit cards. You’ll have to either keep the card, product change to a lower annual fee option, or cancel the card.

Similar to Chase, you can only product change within the same family of cards. Delta cards can only be changed to Delta, and not Hilton or the EveryDay card.

American Express credit cards with downgrade paths:

  • Amex EveryDay Preferred Credit Card
  • Blue Cash Preferred Card
  • Hilton Honors American Express Surpass Card
  • Hilton Honors American Express Aspire Card
  • Delta SkyMiles Gold American Express Card
  • Delta SkyMiles Platinum American Express Card
  • Delta SkyMiles Reserve American Express Card

American Express credit cards with no annual fee:

  • Amex EveryDay Credit Card
  • Blue Cash Everyday Card
  • Hilton Honors Card
  • Delta SkyMiles Blue American Express Card

Should You Cancel Store Credit Cards?

If the store card does not have an annual fee, I recommend keeping it around as a sock drawer card. The card is part of your credit history, and sometimes you can still benefit from the card when you shop at the respective store.

For example, the Nordstrom credit card comes with $100 in alteration credits and double point days. If you find yourself at a Nordstrom sale, it might be beneficial to use the Nordstrom card for purchases.

I generally don’t recommend opening store credit cards since travel cards offer more benefits, and the cards take up a Chase 5/24 slot. However, if the card is already open and doesn’t have an annual fee, there’s no harm in keeping it around.

If you’re worried about monitoring the card, then set up email alerts for transactions. \

Which Credit Card Issuers Do a Hard Inquiry for a Credit Limit Increase?
Credit Limit

Which Credit Card Issuers Do a Hard Inquiry for a Credit Limit Increase?

One quick note: if you are offered a credit limit increase and there's not a hard inquiry, then take it. However, if there is a hard inquiry, then you may be better off applying for a new credit card for the signup bonus.

Taking a hard inquiry at for a credit limit increase is like ordering tap water at a restaurant and paying for a refill. If the first glass of tap water is free, take it. When they try charging you for a refill that should be free, you might as well order anything else except for water.

The data points in this post are gathered from and Reddit forums. h/t Doctor of Credit. We're going to cover the credit limit increase rules for most major banks.

American Express

American Express does a soft pull, and you can request up to 3x your current credit limit. More about American Express at the end of the post.

Chase Bank

Any credit limit increase will always lead to a hard inquiry.


If you initiate the credit limit increase, there will be a hard inquiry. However, Barclays will usually automatically increase the credit limit every six months. If you're not in a rush, it makes sense to wait for them to issue the credit limit increase automatically.

Citi Bank

It can be either a hard or soft inquiry. There's not enough data to know for sure, but the good thing is they tell you before inquiring. When you call in to request an increase, they will notify you if it will be a hard or soft inquiry.

Bank of America

Credit limit increases typically lead to a hard inquiry, but there are a few exceptions. If you log into your online account and there's a special offer, then it will be a soft inquiry. It will mention that there is not a hard inquiry.

Interestingly, even if you reallocate your credit between two Bank of America cards, it will still result in a hard inquiry unless you call them to do it.

Wells Fargo

It can be a hard or soft inquiry. Call in to ask which one it will be.

Capital One

A credit limit increase is a soft inquiry, and you can make a new request every six months.


Discover can be either a hard or soft inquiry, depending on if you're requesting a low or high credit limit increase. They have an online tool that can lead to either result. For example, if you have a card that has a $2,000 limit and you want an increase to $5,000, the tool will either tell you it's fine and grant it or tell you a lower number, then it will be a soft inquiry. If you don't accept the offer or you request a higher limit, then it will be a hard inquiry.

Risky behavior

Be aware that if you ask for too high of a credit limit increase with Amex, it may lead to a financial review. A financial review is when Amex views your account as high risk. They will freeze your account and review each transaction. During the review, they will ask you to send a tax form that allows them to see your tax returns for the past 2-3 years, as well as employment information.

If you choose not to request, they will close all your accounts. Again, for most people, it will be okay, but it's still a hassle to go through the process.

One of the factors that lead to a financial review is if you have a credit card that has more than a $20,000 credit limit. Let's say you start off with a credit card with a $10,000 credit limit, and you make two requests to increase the limit to $30,000; it will automatically trigger a financial review.

Another instance that would trigger a financial review is if your total credit limit with Amex is more than $35,000. For example, if you have three credit cards with a total credit limit of $40,000, it will trigger the review. Amex charge cards are not considered in this equation because they technically don't have a spending limit.

If you do need to spend a lot of money with Amex, my recommendation is to get a charge card like the Platinum or Gold card because there is not a spending limit.

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