What Is Backdating?
One of the great things about American Express is that previously when they report the account opening date of a new credit card to consumer reporting agencies they report your member since date, rather than when the new credit card was actually opened (they actually report a bit of a hybrid, they use the year of your member since date and the month of when you applied for the card).
This means that if you’ve been a member of American Express (e.g had one of their credit cards) since 1990 and applied for a card this year, they would report the opening date of the new credit card as 1990. Giving it an extra 25 years of age. Age is important when it comes to credit scores, as one of the scoring criteria is average age of all accounts (which is a sub section of length of credit history – which accounts for 15% of your FICO score).
No Longer Backdating
A little over a week ago a user on the myFICO forums was told by American Express Credit Bureau Unit that as of March 21st, 2015 (this date is based on when American Express first reports your credit card and not when you were approved/received your card) new credit card accounts would not be backdated and the actual approval date would be used. I’ve been reluctant to post anything, as customer service representatives often tell cardholders the wrong information.
That being said, I now have multiple reports from readers who’s cards have reported to the credit bureaus after this March 21st, 2015 date and they have all stated that their cards were not backdated to their original member since date. Other users at myFICO have also reported the same. I don’t have any recent applications with American Express, so I haven’t been able to confirm this personally but feel free to share your data points in the comments.
It’s important to remember that at the moment this change is only effecting new accounts that are opened, if your American Express card has already reported the old date then it will continue to do so. This also won’t affect the member since date which is shown on the front of your card, only the date reported to consumer reporting agencies.
There is always a possibility that this is a mistake and that the credit bureau unit has been giving out the wrong information to consumers, but I find that doesn’t seem to gel with the data points that I’ve seen. American Express declined to comment for this story.
Why Was This Change Made?
American Express being able to report the member since date rather than the actual account opening date is a bit of an abnormally and isn’t exactly accurate reporting. My understanding is that they were legally able to do this because they honored American’s letters of credit (traveller’s cheques and money orders) at the start of World War 1 in 1914 (don’t ask me how these two are related if anybody can provide more background that would be fantastic).
There are a number of theories on why American Express made this change (something to do with trying to keep Costco cardholders – which makes little to no sense to me). The most likely reason is that they were either receiving pressure from regulators, consumer reporting agencies or even other financial institutions.
The value of the data found in credit reports is dependent on their accuracy (which is kind of scary given that one in five people’s reports could contain errors that cause them not to be extended credit), obviously American Express reporting a date other than the actual opening date isn’t accurate so you can see why companies would want this change made.
This is a bit of a nuisance as opening a new American Express card was always an easy way to boost your average age of accounts for those that had a long history with American Express. That being said, here are two good reasons as to why you shouldn’t panic:
- Length of credit history makes up only 15% of your FICO score. Average age of accounts only represents a minor portion of this 15% (more important is your oldest account)
- It’s now only possible to get a bonus on each American Express personal card once. This means you really need to wait for the best sign up offer on each card before applying, which will drastically reduce the amount of American Express cards that you apply for annually.
This change won’t make a different to my American Express strategy, I’ll continue to wait for best in show offers on personal cards and aggressively churn business cards whenever a suitable bonus comes along. How will this change effect you?
Also please let us know your data points about backdating after this March 21st date in the comments below. P.S At this stage I don’t see any possible advantage of calling in to discuss this change, as this was never a publicly discussed benefit to American Express cards I doubt we’ll see an official announcement either.