I am delighted to announce that I am now a proud member of Amex – the exclusive society … J/k, but only half j/k…
Remember that gold/silver/green card featuring a Roman gladiator in the front that your boss draws out to pay for coffee? Ever heard of the rumored “black card”, a sign of status, that only the elite can afford? What do they all have in common? Gong gong gong gong goooonnnggg!!! These cards are all issued by ….
AMERICAN EXPRESS!!!
This means that I am now part of the elite society, making at least 6 figures a year, right? Well, this part is totally joking.
You’ll hear me talk a lot about American Express, abbreviated Amex, one of the 4 major credit card payment processing networks, but mostly importantly, a major issuer of credit cards, and the most picky one at that.
Going back about a week or two, I was researching Amex credit cards, because I thought they are cool, and was wondering when I should apply for one. A very important finding struck me. Amex, as a credit card issuer, has a unique policy that is most beneficial to people who have just started to build a credit history. It’s called backdating. What this means is that once you have a card issued by American Express-not just processed by the American Express network, then all future cards you have with them will have a history going back to the year you obtained your first card.
Take myself as an example. If I apply and get approved for an Amex card this year, and another one in January 2013, the second card will be reported to credit bureaus as being opened in January 2012, lengthening the age of the account by a whole year! My only other credit card that dates back to January 2012 or earlier is a secured card, but a secured card doesn’t lend me as much credibility as a regular card. So by following this strategy, I’d make my fledgling credit history a lot more appealing to creditors. If someone takes a look at my credit history next year, they will find me having been managing an unsecured American Express card for a whole year!
For someone with a 10-month credit history like me, this credit length extension is invaluable for at least another couple of years. So I devised a strategy to take advantage of this policy.
From my research, co-branded Amex cards are easier to get approved for than all-Amex cards. By co-branded, I mean issued by a joint venture between a traditional credit card issuer and another service provider, such as a hotel or an airline. In Amex’s case, there are three such cards: a Delta Airlines card, a Hilton card, and a Starwood card. Since I had just been offered a special deal on the Gold Delta Skymiles, I decided to pull the trigger on this one.
Now, I was in a delicate situation. I had a ton of credit inquiries during my application mania in September and early October as I was trying to obtain my first unsecured credit card. Having many inquiries implies you are seeking for a lot of credit, a sign of financial troubles. I also had just got my Bank of America Travel Rewards Visa Signature card which was showing a 0 high balance on my credit report, which basically equates to a 0 credit limit and doesn’t help my total available credit. I also had a Discover More card which had not been reported at all – Discover is a little eccentric as far as reporting goes. So I had many factors against me: a short credit history, a short average age of accounts, a tiny total available credit, and a recently opened account. If I waited for another month for my BofA card to report a high balance, while hopefully my Discover would not be reported yet, my portfolio would look much better.
The upside is, if I applied and did not get approved this time, I could apply again in December, giving myself another try under the aforementioned scenario. I also knew that American Express typically would pull a report from Experian, the one of the three credit bureaus where I had the fewest credit inquiries, so the concern about inquiries would be somewhat mitigated. One of my biggest pluses is my above-average annual salary; my cousin had been approved for an Amex Starwood card while still in college. Of course I had never missed a payment (and never will!); this is another huge plus. And hopefully Amex would look favorably upon the fact that I possessed a Visa Signature card, an elite card with a credit limit of at least $5,000.
Fully aware of the situation and possible consequences, I pulled the trigger, filled out the online application, click the submit button, and waited nervously.
When you apply online for a credit card, if you have a top-notch credit history you will be instantly approved and receive an automatic congratulations message. On the other hand, if the credit card issuer needs to manually review, or denies your application, they will show you a message saying your application is pending upon further review; in this case you want to call the reconsideration line to persuade them to approve your application.
After less than half a minute, I got the result: the dreaded “further review” message. I was disappointed, but somewhat anticipated this. Ok, next step: call their consideration line. A Google search turned up Amex’s application status line, and better yet, a link to check the status of your application. So I entered my information to the application status page. Note that this was an hour after I applied; I had some other business to take care of first. The result of the application status inquiry would determine my next course of action. And here it is:
- Ka-Ching!
Phew!
Needless to say, I was ecstatic!!! I was now a member of American Express since 2012, and the next step would be to apply for the next Amex in January 2013 to take advantage of the backdating policy.
A bit to my surprise, Amex ended up pulling credit reports from all 3 credit bureaus. This usually happens if the report from the preferred credit bureau isn’t strong enough, and is probably why my application wasn’t instantly approved. These extra inquiries may be troublesome for my future applications with other credit card issuers, but honestly I already have so many inquiries that one extra inquiry on each report doesn’t really matter at this point. Most importantly, I achieved my goal of locking in my 2012 membership with American Express. I will apply for another Amex card in January, and keep you posted on that.
To recap, I applied and was approved for an American Express Delta Skymiles Gold. This is a significant achievement for someone with a mere 10-month credit history with just one secured card and one recently opened unsecured card. This also grants me a 2012 history for all my future American Express cards, a remarkable advantage for a credit newbie. I went out with my friends to celebrate afterwards, bought them the first round, and rewarded myself with a Rain City burger and some delicious almonds and cashews freshly roasted right in the bar. Once you obtain your first Amex, be proud of yourself, and let me welcome you to Primeville.
From Seattle with love,
-Richard
Hiep's Finance 
This is good advice…thanks for writing.
Although I understand the main point of the strategy, wouldn’t creditors who are analyzing your credit history realize that Amex uses this backdating method? And, thus, would your credit with an Amex card not have as much sway as your credit from other sources?
Hi Brendon. Thanks for inquiring – that’s an excellent question! In response to that, the main method a creditor follows to analyze your credit history is through an automated process, where the numbers get crunched by a system through some sort of algorithm. Since the only account history information available is that provided by Amex, the system has to use that number. This system is by no means perfect; it’s designed to be fair and accurate in most cases. This is a peculiar case, and the current system is not customized to deal with this specificity. The system gives consumers the benefit of the doubt, and this is a loophole that we can exploit to improve your credit history.
wow! that is awesome! I am trying to rebuild my credit – I only one credit card right now with Capital One with a credit limit of $300. Not much. Any suggestions? I would love to obtain another credit card.
Hi Amajon,
Can you provide more information about your current credit situation? How long have you had the Capital One card? Do you have any negative items on your credit report such as bankruptcy or charge-off? Are you looking to obtain a major loan any time soon?
Hi anh Hiep
I just started reading your blog from the very first one. So far I have only got to this post. I just wonder why do we have to apply for more than 1 credit card? Don’t you worry about the annual fees? And how do you decide which card to use for which items or services?
Hope this does not bother you a lot.
Best,
Viet
Hi Viet,
Having more cards and managing them well gives you a better credit history. I am certainly concerned about annual fees; the majority of my cards are either fee-free, fee-waived, or worth the annual fees in one way or another. When you start out, better stick with fee-free cards that you can keep forever.
Which card I use depends on the benefits, perks, and rewards. But I tend to not give this too much thought these days; I’d rather focus my energy on deciding where to spend my money.
Where are you with your credit? If you have any other particular questions, feel free to leave them in the comments.
Best,
Richard
Just out of curiosity how would one persuade them to approve your application if it still said pending? That’s the response I got and it hasn’t loaded on the website yet. Just a bit anxious I guess.
I would say, give them a call and tell them about your situation, why you need the card, etc.