topic Re: Charge Cards Effect on Credit Scores in Understanding FICO® Scoring

Charge Cards Effect on Credit Scores

Anonymous — Sat, 20 Jul 2019 18:37:28 GMT

Hello,

I wonder how AMEX charge cards affect the credit scores if they do not report utilization.

I just got my first charge card few weeks ago.

Is it more advantageous to pay the full balance by the stamement closing date or let the statement close and pay the outstanding balance?

I basically want to improve my credit score.

Thanks in advance.

Re: Charge Cards Effect on Credit Scores

SouthJamaica — Sat, 20 Jul 2019 18:51:17 GMT

@Anonymous wrote:
Hello,
I wonder how AMEX charge cards affect the credit scores if they do not report utilization.
I just got my first charge card few weeks ago.
Is it more advantageous to pay the full balance by the stamement closing date or let the statement close and pay the outstanding balance?
I basically want to improve my credit score.
Thanks in advance.

Althought it doesn't count for dollar utilization percentage, it does count as an "account with a balance", so if you're trying to keep your accounts with balances down, pay it before the statement cuts.

Re: Charge Cards Effect on Credit Scores

Anonymous — Sat, 20 Jul 2019 18:50:34 GMT

The only effect is the AAOA going down due to the new account.

They don't factor into UTIL for scoring.

Sine it has to be PIF unless you opt for POT just setup auto pay for the statement balance.

Re: Charge Cards Effect on Credit Scores

Anonymous — Sat, 20 Jul 2019 20:42:20 GMT

Does this mean that it will have no impact on my score?
The balance is only looked at if we are applying for credit or a loan by the underwriter

Re: Charge Cards Effect on Credit Scores

SouthJamaica — Sat, 20 Jul 2019 21:18:00 GMT

@Anonymous wrote:
Does it mean it will have no impact on my score ever?
The balance is only looked at when applying for a loan

No it does not mean that. If affects

1. number of accounts with balances

2. AoYA

3. AAoA

Re: Charge Cards Effect on Credit Scores

Anonymous — Sat, 20 Jul 2019 21:40:11 GMT

Thank you!

Re: Charge Cards Effect on Credit Scores

Anonymous — Tue, 23 Jul 2019 17:58:44 GMT

I don't see them as being beneficial in helping improve your score. If that was your intent, you'd have been better off with a revolver, which can still be PIF if you choose. IMO

Re: Charge Cards Effect on Credit Scores

HeavenOhio — Wed, 24 Jul 2019 17:23:40 GMT

Welcome, @Anonymous.

Charge cards do count toward utilization in the Experian '98 family of scores. The card's highest balance is used to impersonate a credit limit.

This score family includes the Experian score used for mortgages. During the mortgage process, it is probably a good idea to keep reported charge card balances at zero.

As mentioned, newer scores ignore charge card balances in the computation of utilization. But they would count toward total balances or number of accounts with balances.

Re: Charge Cards Effect on Credit Scores

Anonymous — Wed, 24 Jul 2019 17:30:12 GMT

Thanks for the heads up.
I just wanted to boost my score instead of hurting it by misusing the charge card or paying after the cycle closes .

Re: Charge Cards Effect on Credit Scores

Anonymous — Wed, 24 Jul 2019 18:17:51 GMT

Just use it like a normal person would, and let the statement cut with a balance. Then PIF before the due date, any score hit is only temporary.

Whenever you do need the boost in score for an app etc., pay everything off before the statemnt cut date. However, you will have to wait till they all to report for the increase to happen. Which can be tedious.

Re: Charge Cards Effect on Credit Scores

Anonymous — Wed, 24 Jul 2019 20:24:03 GMT

Thank you for that information HeavenOhio I did not know that. Always love learning!

Re: Charge Cards Effect on Credit Scores

Anonymous — Sat, 27 Jul 2019 20:29:07 GMT

Tahnk you for the recommendation.

I was planning on put all if not most of my charges towards my AMEX Gold card instead of my Chase revolvers. I am trying to break above the 800s

Cheers