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.
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
If you don't automatically get rejected for a Chase Freedom card, then call the backdoor number and talk to a credit analyst to explain your financial situation.
Chase Freedom Backdoor Number: 1-888-270-2127
a) if approved = move to Phase 3
b) if rejected = move to Phase 2
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)
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.
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:
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.
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.
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 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.
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.
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.
We’re going to use a free resource, CreditKarma.com 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:
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:
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.
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.
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.
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 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.
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.
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.
In some of my past posts about building credit, some readers have mentioned that credit cards are not the only way to build credit. There are other ways to build credit, for example, student loans, mortgage payments, and auto loans, but credit cards are one of the more accessible routes.
For the alternative ways to build credit, the main issue is that you're likely paying interest. On the other hand, credit cards do have an interest rate, but you're not charged interest if you pay off your bills in full each month.
The goal of this website is to get "free" travel or money with your everyday spend, so I don't recommend paying interest on your credit card, or it defeats the purpose of earning rewards.
If you're starting at a point where you don't have student loans, a car, or own house, then credit cards would be the logical way to begin your credit journey. It wouldn't make sense to take out debt that you can't utilize.
With credit cards, the barrier to entry is lower because you can start with a secured credit card to build your credit history.
One common misconception is that credit cards are a vehicle for debt. This is a myth as long as you are financially responsible and pay your bills in full each month. If you have more credit cards, this does not mean that you incur more debt.
By having more cards, you're demonstrating that you are financially responsible and can handle multiple lines of credit. One typical scenario a lot of subscribers run into is that they don't have enough diverse credit to get a good interest rate on an auto loan or mortgage. I recommend having at least 3 credit cards to diversify your credit.
