American Express Gold Card

Anonymous · ‎12-25-2009

I have the American Express Gold Card with no pre-set spending limit. I am told that this HURTS my credit score because it is a charge card not a credit card with no spending limit. Thus, my income to debt ratio cannot be determined on this card. But, if I close the card and get another, I am told this will hurt my score because I have not had the card that long, (maybe 3 years). I don't want to leave the card open and pay the annual fee. Should I leave well enough alone?

Thanks for your help!

Anonymous · ‎12-26-2009

Hi jslwriter! Welcome to the myFICO forums!

jslwriter wrote:
I have the American Express Gold Card with no pre-set spending limit. I am told that this HURTS my credit score because it is a charge card not a credit card with no spending limit. Thus, my income to debt ratio cannot be determined on this card. But, if I close the card and get another, I am told this will hurt my score because I have not had the card that long, (maybe 3 years). I don't want to leave the card open and pay the annual fee. Should I leave well enough alone?

Thanks for your help!

FICO doesn't weigh your income to debt ratio, because they have no way of determining your income. It's your credit/debt ratio that has the most impact on your credit score. I'll let someone else weigh in on whether or not the Amex Gold Card reports the highest balance as the credit limit-- if it does, then the highest reported balance will actually contribute to the utilization weight by acting as a 'reported limit'.

Generally speaking, opening new credit lowers your average age of accounts (AAoA), but Amex holders luck out in that they backdate new cards to the date of your oldest open date, which would effectively eliminate the hit that you would normally take for reduced AAoA.

Jazzzy · ‎12-26-2009

@Anonymous wrote:
I have the American Express Gold Card with no pre-set spending limit. I am told that this HURTS my credit score because it is a charge card not a credit card with no spending limit. Thus, my income to debt ratio cannot be determined on this card. But, if I close the card and get another, I am told this will hurt my score because I have not had the card that long, (maybe 3 years). I don't want to leave the card open and pay the annual fee. Should I leave well enough alone?

Thanks for your help!

Hi...and welcome. If you don't want to leave this card open because of the annual fee, by all means close the card. This has a $195 annual fee, right?

The card will continue to report on your credit report for up to 10 years after it is closed. You will not lose its history or age until up to 10 years after closing it, and hopefully before that time you will have replaced it with different credit.

I would not say that it automatically hurts your credit score...but we were an authorized user on a gold card, and it was the highest balance that reported as the credit limit. If you spend up to that highest balance each month, then indeed you do report as being close to that "limit." One way to eliminate that type of reporting is to pay your balance before the statement cuts. That way you will show a zero balance. Tweaking your balance vs credit limit in this way is only important if you are on the verge of applying for new credit, but managing the balances that are reported is certainly a way to raise your FICO scores. (And...how your card reports also varies depending upon whether it is EQ, EX or TU. I know this is how we were reported on TU.)

If you close this card and open a card that better fits your needs, you will take only a minor and temporary FICO ding for a new inquiry and having a new account. This will also lower your average age of accounts...bur remember...adding a new credit tradeline always means taking this small setback. It's nothing that a bit of time won't cure. You have to take a step back in order to take a step forward. You have to do what is good for you in the long run. Don't let your FICO score run your financial actions. If you want a new card, look around before your next AmEx annual fee is due. Apply for it and have it in place. Then say goodbye to your AmEx if it no longer benefits you. Also, you could call AmEx and ask for a product change to one of their cards with no annual fee or a lower annual fee.

Message Edited by LynetteM on 12-26-2009 01:54 PM