topic Re: Credit vs. Charge Card in Understanding FICO® Scoring

Credit vs. Charge Card

MakingProgress — Tue, 11 Sep 2018 12:31:41 GMT

I'm curious about how the differince in FICO scoring between a credit card and a charge card.

I understand how util is calculated on a credit card, but what about a charge card? Does a charge card report as maxed out since it has no preset limit, or is it ignored in the credit usage catagory since it is not revolving.

If a credit card is not considered revolving then how does FICO figure it into your credit score? If it is considered revolving the I would see a real negitive to having one.

Re: Credit vs. Charge Card

Anonymous — Tue, 11 Sep 2018 12:45:48 GMT

FICO 8 and 9 ignore the card in their utilization calculations.

Much older models (e.g. the EX mortgage score) do count it towards utilization. There's a field called High Balance on your report, which is the highest balance your card has ever had. The very old models would make treat this as your credit limit for the practical utilization calculation. Thus, for example, if you had an Amex green card, and the highest your balance had ever been was $8239, then the card would be treated as if it had a credit limit of $8239 for the various util calculations.

So way back in the day (if one had a charge card at all, and there still is no reason to do that necessarily) the best strategy for the owner of a charge card would be to create a huge balance on the card early on (if he could do that without unnecessary spending).

Re: Credit vs. Charge Card

Revelate — Tue, 11 Sep 2018 14:05:46 GMT

If you mean charge card as a tradeilne having a term of 1 month, then what CGID stated is exactly right.

That said there's a number of retail cards (Sync) that report as "charge cards" on some bureaus, but they behave exactly like normal revolvers as far as FICO is concerned. Actually I don't know of anyone other than Amex that has the exclusion for their charge cards but probably there's someone else out there.

Re: Credit vs. Charge Card

MakingProgress — Tue, 11 Sep 2018 16:13:56 GMT

@Revelate wrote:
If you mean charge card as a tradeilne having a term of 1 month, then what CGID stated is exactly right.

That said there's a number of retail cards (Sync) that report as "charge cards" on some bureaus, but they behave exactly like normal revolvers as far as FICO is concerned. Actually I don't know of anyone other than Amex that has the exclusion for their charge cards but probably there's someone else out there.

I was specificly thinking of the Amex charge cards. So does FICO 8 and 9 ignore them completely? Or do they have some other scoreing impact as opposed to Util?

Re: Credit vs. Charge Card

Anonymous — Tue, 11 Sep 2018 16:34:17 GMT

@Anonymous
So way back in the day (if one had a charge card at all, and there still is no reason to do that necessarily) the best strategy for the owner of a charge card would be to create a huge balance on the card early on (if he could do that without unnecessary spending).

CGID, in this strategy example the original reporting of the high balance would result in 100% or maxed out utilization for that cycle, correct? It would also mean that any time a new "high balance" is achieved that the card holder would be scored according to their highest individual line being at 100%.

Re: Credit vs. Charge Card

Anonymous — Tue, 11 Sep 2018 18:03:27 GMT

@Anonymous wrote:
@Anonymous
So way back in the day (if one had a charge card at all, and there still is no reason to do that necessarily) the best strategy for the owner of a charge card would be to create a huge balance on the card early on (if he could do that without unnecessary spending).
CGID, in this strategy example the original reporting of the high balance would result in 100% or maxed out utilization for that cycle, correct? It would also mean that any time a new "high balance" is achieved that the card holder would be scored according to their highest individual line being at 100%.

Quite right, BBS. But just to remind our OP, the "scoring" that BBS is talking about is scoring by a very old model, like EX mortgage. This is why in the olden days score-savvy people would wait for a couple months when they knew their score could take a hit, and drive up their high balance as high as they could without spending anythinge extra.

To answer our OP's followup question, FICO 8 and 9 ignore it in terms of utilization. There are many mays in which the tradeline would not be ignored: if it had late payments, in terms of how it affects age-related factors, etc.

One factor for which I do not know how FICO 8 and 9 handle an Amex charge card is "number of tradelines reporting a positive balance." I am guessing that a charge card with a positive balance is included in this factor for all models, but I do not know.

Re: Credit vs. Charge Card

SouthJamaica — Tue, 11 Sep 2018 20:34:27 GMT

@MakingProgress wrote:
I'm curious about how the differince in FICO scoring between a credit card and a charge card.

I understand how util is calculated on a credit card, but what about a charge card? Does a charge card report as maxed out since it has no preset limit, or is it ignored in the credit usage catagory since it is not revolving.

If a credit card is not considered revolving then how does FICO figure it into your credit score? If it is considered revolving the I would see a real negitive to having one.

It's ignored by FICO 8 in the utilization category.

Re: Credit vs. Charge Card

Thomas_Thumb — Tue, 11 Sep 2018 21:49:59 GMT

@Anonymous wrote:
@Anonymous
Quite right, BBS. But just to remind our OP, the "scoring" that BBS is talking about is scoring by a very old model, like EX mortgage. This is why in the olden days score-savvy people would wait for a couple months when they knew their score could take a hit, and drive up their high balance as high as they could without spending anythinge extra.

To answer our OP's followup question, FICO 8 and 9 ignore it in terms of utilization. There are many mays in which the tradeline would not be ignored: if it had late payments, in terms of how it affects age-related factors, etc.

One factor for which I do not know how FICO 8 and 9 handle an Amex charge card is "number of tradelines reporting a positive balance." I am guessing that a charge card with a positive balance is included in this factor for all models, but I do not know.

Charge cards are tradelines and therefore are included in AAoA, AoOA and AoYA. They are also included in # of accounts with balances. They are not true revolving credit and therefore are not included in revolving utilization for the more recent Fico 8 and Fico 9 models. They also are not included in the "recent revolving account activity" attribute.

As far as I know all AMEX charge cards are NPSL. Thus the practice of HB being used as a psuedo CL. Back in the day a lot of store cards were charge cards with an actual CL.

Re: Credit vs. Charge Card

MakingProgress — Wed, 12 Sep 2018 13:22:36 GMT

If I am understanding everyone correctly Amex Charge Cards would count in all categories of scoring except revolving utilization.

Thanks for all the good informtion.

Re: Credit vs. Charge Card

Anonymous — Wed, 12 Sep 2018 14:03:53 GMT

You have it right... except that what you said does not apply to the oldest models, e.g. the mortgage models. There Amex charge cards do count toward utilization, with the High Balance being used as a stand-in for Credit Limit.

Re: Credit vs. Charge Card

Revelate — Fri, 14 Sep 2018 02:10:27 GMT

@Anonymous wrote:
You have it right... except that what you said does not apply to the oldest models, e.g. the mortgage models. There Amex charge cards do count toward utilization, with the High Balance being used as a stand-in for Credit Limit.

To be specific it's only FICO 98 when it comes to any used score today that has this issue.

FICO 04, which both EQ FICO 5 and TU FICO 4 are on the standard tri-merge mortgage pull discount Amex charge cards and any other tradeline with a Term of 1 month from revolving utilization calculations same as the current FICO 8/9 models.

Ultimately if you're getting prepped for a mortgage and implementing AZEO, leave the balance on a national bank card... my old beloved Sallie Mae was my balance card during my mortgage fiesta for example.

Re: Credit vs. Charge Card

SouthJamaica — Sun, 16 Dec 2018 16:50:19 GMT

@Anonymous wrote:
FICO 8 and 9 ignore the card in their utilization calculations.

Much older models (e.g. the EX mortgage score) do count it towards utilization. There's a field called High Balance on your report, which is the highest balance your card has ever had. The very old models would make treat this as your credit limit for the practical utilization calculation. Thus, for example, if you had an Amex green card, and the highest your balance had ever been was $8239, then the card would be treated as if it had a credit limit of $8239 for the various util calculations.

So way back in the day (if one had a charge card at all, and there still is no reason to do that necessarily) the best strategy for the owner of a charge card would be to create a huge balance on the card early on (if he could do that without unnecessary spending).

I just got my first personal charge card. Then I put in a search and found your excellent post, CGID, which sums up nicely what I do and don't need to concern myself with.

Question: would the high balance be an intra month number, so that if I wanted to optimize the first month all I would need to do is make sure to pay it down, or pay it off, by the time the statement is cut?