How American Express Can Affect Your Credit Score

Like any credit card, your American Express card directly influences your credit score. From the moment you apply, your financial habits are reported, shaping your overall credit health and borrowing power.

1. Application and Inquiry: When you apply for a card, American Express performs a hard inquiry on your credit report. This can cause a small, temporary dip in your credit score.
2. New Account Reporting: Upon approval, the new account is added to your credit file. This lowers the average age of your accounts but can positively impact your credit mix, both of which are scoring factors.
3. Payment History: Amex reports your payment activity to the major credit bureaus. Consistent on-time payments build a positive history, the most significant factor in your score, while late payments cause substantial damage.
4. Credit Utilization: Your balance and credit limit are also reported. The ratio of your balance to your limit—your credit utilization—is a key scoring component. High utilization can negatively impact your score.

How Much Will American Express Affect Your Credit Score?

The exact impact an American Express card has on your credit score depends on several factors. Here are a few key things to consider:

• Credit utilization: Amex charge cards often have no preset spending limit, which can be reported differently to credit bureaus. This may impact your overall credit utilization ratio, a key factor in your score.
• Hard inquiries: Each time you apply for a new American Express card, a hard inquiry is placed on your credit report. This can cause a small, temporary dip in your credit score for a short period.
• Payment history: Consistently paying your Amex bill on time helps build a positive payment history, the most important factor in your score. Late payments can have a significant negative impact on your credit.

How You Can Avoid American Express Affecting Your Credit Score

Pay Balances Promptly

Paying your American Express statement balance in full and on time is the most effective strategy. This practice demonstrates responsible credit management to the bureaus, preventing negative marks for late payments and keeping your account in good standing, which supports a healthy credit score.

Manage Your Credit Utilization

Even though some Amex cards are charge cards, the balance can still influence your credit utilization ratio. To protect your score, avoid high spending relative to your income. Keeping your reported balance low helps maintain a healthy utilization rate across all your credit accounts.

Ways to Improve Your Credit Score

Your credit score plays a crucial role in your financial life, but it's not set in stone. With consistent effort and a few proven methods, it is always possible to improve your creditworthiness.

• Monitor your credit reports regularly. Obtain your free reports and check them for inaccuracies or signs of identity theft, as disputing errors can remove negative items that unfairly lower your score.
• Establish automatic bill payments. Setting up automatic payments helps ensure you never miss a due date, which is critical since payment history is the most significant factor in your credit score.
• Reduce your credit utilization ratio. Aim to keep the amount of credit you use below 30% of your total limit, as this is the second most important factor in your score.
• Become an authorized user. You can benefit from the primary cardholder’s positive payment history and low utilization by being added to their account, which can add positive data to your credit file.
• Diversify your credit mix. Maintaining a variety of credit types, such as credit cards and installment loans, demonstrates to lenders that you can responsibly manage different forms of credit.

The Bottom Line

Like any credit card, an American Express card can affect your credit score. Factors include the initial credit check, your payment history, and how you manage your account over time.

Frequently Asked Questions

Does getting an American Express card hurt your credit score?

Applying for any new credit card, including one from American Express, triggers a hard inquiry which can temporarily dip your credit score by a few points.

How does an American Express charge card affect my credit score?

Amex charge cards impact your score differently. While payment history is reported, the absence of a preset credit limit means utilization ratios may not be calculated traditionally.

Does closing an American Express card affect my credit score?

Yes, closing an Amex card can lower your score by reducing your available credit, which increases your credit utilization ratio and can shorten your credit history length.