Charge cards and credit rating

concernedSaver

I recently got an American Express charge card, and I plan to make it my primary spending card to benefit from membership rewards.

Since it's a charge card, it doesn't come with a monthly credit limit: are there any "rules" about using those cards effectively if you're concerned about building or keeping your credit score? Are they seen as a "good" sign or a "bad" sign? Are they reported to CRAs in the same way a credit card is reported?

Paully232000

Yes they do report to the CRAs. On my credit report it shows the monthly balance at the time that AMEX send the information to the reference agency, and whether i paid on time or not. Rules' as such would be very similar to any other form of credit, dont default on it, pay what they ask for each month and you will be fine. '

concernedSaver

So they simply don't report a credit limit? I would assume most lenders' scoring algorithms are smart enough to simply don't take into account the credit available / credit used ratio. If that's correct, I'd assume that shifting my spending towards the charge card from the credit card will bring down my overall credit utilisation.

I'm probably overthinking it, since as you said the only universally valid rule that matters is «always pay your debits on time», but we're looking to get a mortgage in a year and really want my credit profile to look the best.

Paully232000

concernedSaver wrote: »

So they simply don't report a credit limit? I would assume most lenders' scoring algorithms are smart enough to simply don't take into account the credit available / credit used ratio. If that's correct, I'd assume that shifting my spending towards the charge card from the credit card will bring down my overall credit utilisation.

I'm probably overthinking it, since as you said the only universally valid rule that matters is «always pay your debits on time», but we're looking to get a mortgage in a year and really want my credit profile to look the best.

No, they dont report a credit limit on the reports that I can see, however it would not surprise me if all lenders use some sort of figure/calculation to work out this in comparison to a CC.

I would imagine that you are over-thinking it, which is not unusual, or a bad thing. I think it is more important with regards a mortgage, in my opinion, that you manage your debts well, pay as much as you can towards a CC each month, whilst not going over your limit or missing payments, and dont have too much debt in comparison to your income, as debt will be taken into consderation with any mortgage app.

One good thing about a charge card, if you do shift more use on to this, is that you have to pay it off at the end of the month. But having said that, you can always set up a CC direct debit to pay full amount.