topic Re: AMEX Utilization Clarification in Credit Cards

AMEX Utilization Clarification

Anonymous — Wed, 18 Nov 2015 04:06:07 GMT

Hello, new guy here...

After years of cultvating my bad credit, I decided to pull the trigger yesterday and got approved for an AMEX Green and a Chase Sapphire Preferred. (woohoo!)

After searching the net, I've been reading conflicting advice about how charge card utilization works. Some sources say the "high limit" on the AMEX is not included in calculating utilization, while other sources say the "high limit" will affect it.

For example, let's say my CSP has a limit of $5000.00. If my credit report shows my AMEX with a "high limit" of $2500.00, and my CSP has a balance of $0.00, would my utilization be 50% or 0%?

Thank you in advance.

Re: AMEX Utilization Clarification

vanillabean — Wed, 18 Nov 2015 05:13:09 GMT

Welcome and nice going on the two cards! The high limit only kicks when no credit limit is listed. 0% util either way.

Re: AMEX Utilization Clarification

takeshi74 — Wed, 18 Nov 2015 13:56:43 GMT

@Anonymous wrote:

After searching the net, I've been reading conflicting advice about how charge card utilization works. Some sources say the "high limit" on the AMEX is not included in calculating utilization, while other sources say the "high limit" will affect it.

There isn't just one scoring model out there used by creditors. Whether or not a charge card factors into revolving utilization depends on the scoring model. Newer FICO's do not include them.

Re: AMEX Utilization Clarification

Anonymous — Wed, 18 Nov 2015 16:17:40 GMT

@Anonymous wrote:
Hello, new guy here...

After years of cultvating my bad credit, I decided to pull the trigger yesterday and got approved for an AMEX Green and a Chase Sapphire Preferred. (woohoo!)

After searching the net, I've been reading conflicting advice about how charge card utilization works. Some sources say the "high limit" on the AMEX is not included in calculating utilization, while other sources say the "high limit" will affect it.

For example, let's say my CSP has a limit of $5000.00. If my credit report shows my AMEX with a "high limit" of $2500.00, and my CSP has a balance of $0.00, would my utilization be 50% or 0%?

Thank you in advance.

Take this with a grain of salt, because this is all inferred from what I've read here:

Ordinary revolvers, like your CSP, calculate ulization as the amount you have borrowed as of the last report (usually statement date, but some update at other times) divided by the total amount of credit available to you. For your CSP, if you charge $500, you would have $500/$5000 = 10% utilization on that card

For charge cards such as Amex Green, there is no limit. Instead, the card reports the highest limit that you've charged. To get utilization, you would then divide the amount borrwed as of the last report by the high limit. So, if you charge $3000 in the first month, you have $3000/$3000 = 100% utilization. In the second month, you only charge $100, then you have $100/$3000 = 3% utilization. If you then charge $5k, you're back to $5000/$5000 = 100% utilization. If you follow that up (now in month 4) with another $100 charge, you get $100/$5000 = 2% utilization.

Your overall utilization will be the total amount you have borrowed across all cards divided by the sum of the limits of those cards, which, in the case of charge cards, is the high limit used. So, lets say that in month 5, you have $500 on CSP and $100 on Amex Green, your overall utilization will be ($500+$100)/($5000+$5000)=$600/$10000 = 6%

Re: AMEX Utilization Clarification

UncleB — Wed, 18 Nov 2015 16:34:59 GMT

@Anonymous wrote:
@Anonymous wrote:
Hello, new guy here...

After years of cultvating my bad credit, I decided to pull the trigger yesterday and got approved for an AMEX Green and a Chase Sapphire Preferred. (woohoo!)

After searching the net, I've been reading conflicting advice about how charge card utilization works. Some sources say the "high limit" on the AMEX is not included in calculating utilization, while other sources say the "high limit" will affect it.

For example, let's say my CSP has a limit of $5000.00. If my credit report shows my AMEX with a "high limit" of $2500.00, and my CSP has a balance of $0.00, would my utilization be 50% or 0%?

Thank you in advance.
Take this with a grain of salt, because this is all inferred from what I've read here:

Ordinary revolvers, like your CSP, calculate ulization as the amount you have borrowed as of the last report (usually statement date, but some update at other times) divided by the total amount of credit available to you. For your CSP, if you charge $500, you would have $500/$5000 = 10% utilization on that card

For charge cards such as Amex Green, there is no limit. Instead, the card reports the highest limit that you've charged. To get utilization, you would then divide the amount borrwed as of the last report by the high limit. So, if you charge $3000 in the first month, you have $3000/$3000 = 100% utilization. In the second month, you only charge $100, then you have $100/$3000 = 3% utilization. If you then charge $5k, you're back to $5000/$5000 = 100% utilization. If you follow that up (now in month 4) with another $100 charge, you get $100/$5000 = 2% utilization.

Your overall utilization will be the total amount you have borrowed across all cards divided by the sum of the limits of those cards, which, in the case of charge cards, is the high limit used. So, lets say that in month 5, you have $500 on CSP and $100 on Amex Green, your overall utilization will be ($500+$100)/($5000+$5000)=$600/$10000 = 6%

For the score models that treat the 'high balance' as the de-facto credit limit for utilization purposes, this is an excellent explanation of how it's figured.

Years ago when I had my first Green card this is precisely how my own banker did the calculation as well. Back then, it was actually advantageous to run up a high balance on the Green card early on (for one month), to 'set the bar', so to speak, so that future utilization would look better for the algorithm. However, as it's been stated some newer models can now differentiate between a charge and a credit (revolver) card, and those models don't figure the charge card balance into the utilization at all.

Congrats on your new cards!

Re: AMEX Utilization Clarification

redpat — Wed, 18 Nov 2015 16:48:08 GMT

@UncleB wrote:
@Anonymous wrote:
@Anonymous wrote:
Hello, new guy here...

After years of cultvating my bad credit, I decided to pull the trigger yesterday and got approved for an AMEX Green and a Chase Sapphire Preferred. (woohoo!)

After searching the net, I've been reading conflicting advice about how charge card utilization works. Some sources say the "high limit" on the AMEX is not included in calculating utilization, while other sources say the "high limit" will affect it.

For example, let's say my CSP has a limit of $5000.00. If my credit report shows my AMEX with a "high limit" of $2500.00, and my CSP has a balance of $0.00, would my utilization be 50% or 0%?

Thank you in advance.
Take this with a grain of salt, because this is all inferred from what I've read here:

Ordinary revolvers, like your CSP, calculate ulization as the amount you have borrowed as of the last report (usually statement date, but some update at other times) divided by the total amount of credit available to you. For your CSP, if you charge $500, you would have $500/$5000 = 10% utilization on that card

For charge cards such as Amex Green, there is no limit. Instead, the card reports the highest limit that you've charged. To get utilization, you would then divide the amount borrwed as of the last report by the high limit. So, if you charge $3000 in the first month, you have $3000/$3000 = 100% utilization. In the second month, you only charge $100, then you have $100/$3000 = 3% utilization. If you then charge $5k, you're back to $5000/$5000 = 100% utilization. If you follow that up (now in month 4) with another $100 charge, you get $100/$5000 = 2% utilization.

Your overall utilization will be the total amount you have borrowed across all cards divided by the sum of the limits of those cards, which, in the case of charge cards, is the high limit used. So, lets say that in month 5, you have $500 on CSP and $100 on Amex Green, your overall utilization will be ($500+$100)/($5000+$5000)=$600/$10000 = 6%
For the score models that treat the 'high balance' as the de-facto credit limit for utilization purposes, this is an excellent explanation of how it's figured.

Years ago when I had my first Green card this is precisely how my own banker did the calculation as well. Back then, it was actually advantageous to run up a high balance on the Green card early on (for one month), to 'set the bar', so to speak, so that future utilization would look better for the algorithm. However, as it's been stated some newer models can now differentiate between a charge and a credit (revolver) card, and those models don't figure the charge card balance into the utilization at all.

Congrats on your new cards!

+1 Charge cards have no factor in utilization.

Re: AMEX Utilization Clarification

vanillabean — Wed, 18 Nov 2015 18:01:21 GMT

Utilization is not everything, lol.

Re: AMEX Utilization Clarification

Anonymous — Thu, 19 Nov 2015 06:38:13 GMT

I did not know that the different models approched charge cards differently.

I know utilization is not everything, but I do feel its very important to be very clear in how credit utilization works in order to maintain the highest scores possible.

Your feedback was really helpful. Thanks again for the help and the warm welcome!