AMEX and Scoring

[esm2286]

Hello,

I just received my AMEX gold card. The only other credit card I have is a student credit card with a 500$ limit (I know it is low, I hardly used it!). I want to use my AMEX for everyday purchases to make the most out of it. I am confused about utilization. Since there is no set limit, will my spending/balance be reported against this $500 limit from my other card, as this is the only overall "limit" I have? I am concerned because I may spend about 3k a month and don't want this against my $500 limit, since this will increase my overall score. 

[FlaDude]

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@esm2286 wrote:

Hello,

I just received my AMEX gold card. The only other credit card I have is a student credit card with a 500$ limit (I know it is low, I hardly used it!). I want to use my AMEX for everyday purchases to make the most out of it. I am confused about utilization. Since there is no set limit, will my spending/balance be reported against this $500 limit from my other card, as this is the only overall "limit" I have? I am concerned because I may spend about 3k a month and don't want this against my $500 limit, since this will increase my overall score. 

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Congrats on the new card! Charge cards don't count against utilization. While there are options to designate certain purchase for pay over time, generally the card is paid off every month. 

[Thomas_Thumb]

As mentioned above, charge cards are not classified as revolving credit accounts. They are classified as "open accounts" with 1 month terms. Therefore, your AMEX card's statement balance will not be considered in aggregate revolving account utilization.

Do you want to have your credit scores drop 20 to 30 points? No - then you need to maintain an open revolving credit card account. Furthermore that account needs to report a non $0 statement balance (under 9% of the card's credit limit).

Why?

Fico looks for some monthly activity on 1 or more REVOLVING accounts. If there is no activity a penalty for: "no recent revolving account activity" is assessed. A $0 balance is considered no activity.

Fico also penalizes for elevated revolving utilization in aggregate abd by account. Stay below 9% UT in aggregate and 29% per card to avoid significant UT penalties.

Since you only have the single $500 account, AG UT = Card UT. Recommend reporting a statement balance between $5 and $40 on the card.

I assume you still are a student with limited PT income. If not, and you now have a FT income, convert the card to a non student standard version and ask for a CLI - perhaps to $2k.

[esm2286]

Ok yes, I do still use the card with the $500 limit. So you are saying continue using that one so that it still is showing that I have revolving credit utilization, keeping it below 9% per month. My Amex will NOT be considered in any utilization and is not considered a revolving account. Is that correct? 

[Thomas_Thumb]

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@esm2286 wrote:

Ok yes, I do still use the card with the $500 limit. So you are saying continue using that one so that it still is showing that I have revolving credit utilization, keeping it below 9% per month. My Amex will NOT be considered in any utilization and is not considered a revolving account. Is that correct? 

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Yes, that is correct.

[SouthJamaica]

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@esm2286 wrote:

Hello,

I just received my AMEX gold card. The only other credit card I have is a student credit card with a 500$ limit (I know it is low, I hardly used it!). I want to use my AMEX for everyday purchases to make the most out of it. I am confused about utilization. Since there is no set limit, will my spending/balance be reported against this $500 limit from my other card, as this is the only overall "limit" I have? I am concerned because I may spend about 3k a month and don't want this against my $500 limit, since this will increase my overall score. 

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Amex charge cards are not counted in utilization, in almost all FICO scoring models.

[SouthJamaica]

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@esm2286 wrote:

Ok yes, I do still use the card with the $500 limit. So you are saying continue using that one so that it still is showing that I have revolving credit utilization, keeping it below 9% per month. My Amex will NOT be considered in any utilization and is not considered a revolving account. Is that correct? 

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Yes the Amex charge card is not considered in utilization, in almost all FICO scoring models.

As to your credit card, it doesn't matter how much you use it; it just matters that the reported balance be low.

[Thomas_Thumb]

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@SouthJamaica wrote:

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@esm2286 wrote:

Ok yes, I do still use the card with the $500 limit. So you are saying continue using that one so that it still is showing that I have revolving credit utilization, keeping it below 9% per month. My Amex will NOT be considered in any utilization and is not considered a revolving account. Is that correct? 

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Yes the Amex charge card is not considered in utilization, in almost all FICO scoring models.

As to your credit card, it doesn't matter how much you use it; it just matters that the reported balance be low.

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The AMEX is never considered in aggregate UT for any Fico scoring model.

The card is looked at individually for utilization in EX score 2 (a old Fico 98 algorithm) based CB/HB. I call this a psuedo utilization because high balance is not a credit limit.

Again, no Fico models consider a reported AMEX charge card balance in aggregate utilization nor is the account classified as a revolving account even though it is a credit card.

[SouthJamaica]

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@Thomas_Thumb wrote:

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@SouthJamaica wrote:

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@esm2286 wrote:

Ok yes, I do still use the card with the $500 limit. So you are saying continue using that one so that it still is showing that I have revolving credit utilization, keeping it below 9% per month. My Amex will NOT be considered in any utilization and is not considered a revolving account. Is that correct? 

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Yes the Amex charge card is not considered in utilization, in almost all FICO scoring models.

As to your credit card, it doesn't matter how much you use it; it just matters that the reported balance be low.

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The AMEX is never considered in aggregate UT for any Fico scoring model.

The card is looked at individually for utilization in EX score 2 (a old Fico 98 algorithm) based CB/HB. I call this a psuedo utilization because high balance is not a credit limit.

Again, no Fico models consider a reported AMEX charge card balance in aggregate utilization nor is the account classified as a revolving account even though it is a credit card.

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Thanks for clarification.