Charge Card / Credit Score

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ingramjuan
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Charge Card / Credit Score

Postby ingramjuan » Wed Dec 10, 2014 8:52 pm

I am to assume my credit score will drop around 10 to 15 points when I apply for a new credit card / charge card? How are credit scores calculated with a charge card, since you pay the balance in full each month and you don't have a credit limit?
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Robrus1
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Postby Robrus1 » Wed Dec 10, 2014 9:00 pm

Not exactly sure how the scores are calculated, but since charge cards don't report a limit, even though technically you do have an internal limit, the highest balance that has reported/generated on a statement is what they use to calculate utilization, from what I understand. Someone correct me if I'm wrong.
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PlyrStar93
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Postby PlyrStar93 » Wed Dec 10, 2014 10:09 pm

Whether the "high balance" is used to calculate utilization or not depends on the model used.

Generally if it's old FICO model, then the high balance is considered as credit limit and the account is calculated into utilization. New FICO 08 model has changed this, i.e. high balance is not recognized as credit limit, and the account is not considered in utilization.

Of course, AAoA and payment history are still factored as usual. If you assume a drop for the application, that's mainly because of reduced AAoA (note AMEX backdating, so you may or may not have AAoA drop) and new inquiry.
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takeshi
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Postby takeshi » Thu Dec 11, 2014 10:05 am

ingramjuan wrote:I am to assume my credit score will drop around 10 to 15 points when I apply for a new credit card / charge card?

There are some rules of thumb that people have posted but I don't recommend simply assuming that 1 HP = X points. It's also not just a matter of score. One with a thin and/or poor credit profile can see inquiries listed as a reason for denial while another with a thicker profile would not for the same number of inquiries.

ingramjuan wrote:How are credit scores calculated with a charge card, since you pay the balance in full each month and you don't have a credit limit?

Scoring models aren't all the same. It all depends on the model as indicated above.

popamode72
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Postby popamode72 » Thu Dec 11, 2014 2:05 pm

ingramjuan wrote:I am to assume my credit score will drop around 10 to 15 points when I apply for a new credit card / charge card? How are credit scores calculated with a charge card, since you pay the balance in full each month and you don't have a credit limit?


I can tell you that they will not affect your utilization at all but you'll still have a limit as how much you can charge (which obviously isn't reported either) which Amex will increase from time to time provided that you're using the card and have good payment history, etc.

And the effect a HP will have on your CR will depend on several things as Takeshi has noted above. One time when I had an inquiry added onto one of my reports, my FICO score somehow actually went up but I assume there were other factors at play there.
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