Do Charge Cards Affect My Credit Score the Same as Credit Cards?

Charge cards have a lesser effect because they don't have a preset limit and aren't included in credit utilization.

Steve NicastroMay 19, 2020

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Charge cards and credit cards may look the same in your wallet, but they are distinctly different in one key aspect that directly affects your credit score.

  • Charge cards typically don't have a predetermined credit limit. This is because charge cards don't let you carry a balance from one month to the next. Your entire bill must be paid in full each month. You get a lot of flexibility, but you don't have the ability to pile on debt month after month.

  • Credit cards have a specific credit limit that you cannot exceed. Credit cards, of course, allow you to carry a balance and do not need to be paid off in full each month. You can add more debt month after month, but your credit limit puts a hard cap on just how much debt you can take on.

Because charge cards don't have a credit limit, they are not factored into your credit utilization ratio, which is a major component of your credit score.

Factors in your credit score 

To understand how charge cards affect your score, take a look at what goes into that score. With FICO scores, for example:

  • 35% of your score is your payment history. Late or missed payments have a negative affect on your score, while making payments on time each month has a positive effect on your score.

  • 30% is the amounts you owe. This is where credit utilization comes in. Utilization is simply the percentage of your available credit that you're using. If you have a $1,000 credit limit and $300 in credit card debt, your utilization is 30%. It is a good idea to keep this percentage under 30%, as it shows lenders that you are responsible with your spending and paying off your debt.

  • 15% is the length of your credit history. Your credit score factors in things like how long your credit accounts have been open, the age of your oldest account and the average age of all your accounts.

  • 10% is the types of credit in use. Having credit cards and installment loans with a good payment history will increase your credit score.

  • 10% is new credit. This includes recent credit applications and how many new accounts you have.

Charge cards and utilization ratio

Charge cards can affect multiple factors of your credit score — your payment history, length of your credit history, types of credit in use and new credit. However, because they don't have a credit limit, they aren't factored into utilization ratio. As a result, they have a lesser effect on your credit score than credit cards do.

This can be both good and bad. A high charge card balance one month might not have as big a negative effect as running up high utilization on a credit card. But at the same time, if you keep your balance fairly low on a charge card, you won't get the credit-score benefit of a low utilization.

All that said, maintain perspective. "Lesser effect" doesn't mean "no effect" or even "minimal effect." The biggest factor in your scores is whether you make your payments on time, and payments on charge cards count toward that.

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