I was recently asked whether American Express reports to the credit bureaus. In other words, if you have an American Express credit card, does it affect your credit score in any way? Low balance, high balance, pay on time, pay late, does it matter?
In a word, yes. American Express does indeed report to the three credit bureaus (Expieran, Equifax, and TransUnion), and if you do not make your payments on time, or exceed your limit, it will definitely affect your credit score.
Here’s an interesting fact, however: using an American Express card, even if you use it responsibly, can actually hurt your credit score.
Let me explain. Most credit card issuers report three things about you to the credit agencies: your current balance, your credit limit, and your payment history. This is important, because the percentage of available credit that you use affects your credit score. If you have a $20,000 limit and you’re only carrying a balance of $1,000, that’s good. You’re only using 5% of your available credit. But if you have a limit of $1,200 and your balance is $1,000, that’s not good. From the credit bureaus point of view, that means you are using almost all of your available credit and are in danger of going over the limit. This “debt to credit ratio”, as it’s called, accounts for 30% of your credit score.
The problem with American Express is that they do not report your credit limit, because they generally have no limit (I’m guessing this is how the rumor got started that Amex does not report). So the credit bureaus take your biggest ever monthly credit expenditure, and mark it as your limit. So if you regularly charge a few hundred dollars and pay it off each month, and have never gone much above that, it can look to the credit bureaus as if you’re maxing out your card every month. And that hurts your credit score.