How American Express Plan It May Impact Your Credit Score

While using American Express Plan It doesn't trigger a hard inquiry on your credit report, it can indirectly influence the key factors that determine your score. Here’s a look at the progression.

1. Purchase and Balance: The full amount of the purchase you enroll in a Plan It plan is added to your card's total balance, just like any other charge. This happens without a new credit application.
2. Credit Utilization Impact: This increased balance can raise your credit utilization ratio—your balance relative to your credit limit. A higher ratio, particularly above 30%, can temporarily lower your credit score.
3. Payment History Record: Your monthly Plan It payment is part of your card's required payment. Making these payments on time contributes positively to your payment history, the most significant factor for your credit score.
4. Gradual Balance Reduction: As you pay down the plan each month, your overall balance decreases. This gradually lowers your credit utilization, which can help your score recover and improve over the life of the plan.

How Much Will American Express Plan It Affect Your Credit Score?

Using the American Express Plan It feature can influence your credit score in several ways. Here are the key factors to consider before enrolling a purchase in a plan.

• Credit Utilization Ratio. Plan It balances are still part of your total reported balance to credit bureaus. This means the feature won't lower your credit utilization ratio, a key factor in your credit score.
• Payment History. Your Plan It payments are included in your minimum payment due each month. Consistently paying on time helps your payment history, while missed payments will hurt your credit score.
• No Hard Inquiry. Setting up a payment plan through Plan It does not trigger a hard credit inquiry. This means using the feature itself won't cause a temporary dip in your credit score.

How You Can Avoid American Express Plan It Affecting Your Credit Score

Make On-Time Payments

Your monthly Plan It payment is included in your minimum payment due. Failing to pay this amount on time can result in late fees and a negative mark on your credit report, which can directly lower your credit score. Consistency is key to protecting your credit.

Monitor Credit Utilization

The full amount of a purchase moved into a Plan It plan still contributes to your credit utilization ratio. To avoid a negative impact, keep your total balance, including planned purchases, well below 30% of your overall credit limit to maintain a healthy score.

Pay More Than the Minimum

While Plan It offers structured payments, the total planned balance still affects your utilization. Paying more than the adjusted minimum payment due each month helps lower your overall balance faster, reducing its potential impact on your credit score over the long term.

Ways to Improve Your Credit Score

Improving your credit score is always possible, though it requires consistent effort and positive financial habits over time. With the right approach, you can see meaningful changes within a few months by following some proven methods.

• Monitor your credit reports regularly. Check your reports from all three major bureaus to identify and dispute any inaccuracies or signs of identity theft.
• Establish automatic bill payments. Your payment history is the most significant factor in your score, and automating payments ensures you never miss a due date.
• Reduce your credit utilization ratio. Aim to use less than 30% of your available credit, as a lower ratio signals to lenders that you are a responsible borrower.
• Become an authorized user. Being added to the credit card of someone with a strong payment history can help you build your own credit file.
• Diversify your credit mix. Having a combination of different credit types, like credit cards and installment loans, shows lenders you can manage various forms of debt.
• Limit hard inquiries. Avoid applying for too much new credit at once, as multiple hard inquiries in a short period can temporarily lower your score.

The Bottom Line

American Express Plan It lets you pay for large purchases in installments. While using the feature itself won't hurt your credit, failing to make your scheduled payments certainly can.

Frequently Asked Questions

Does using Amex Plan It result in a hard credit inquiry?

No, setting up a plan does not trigger a hard inquiry on your credit report since you are already an approved cardmember with American Express.

How does Plan It affect my credit utilization ratio?

Your planned balance is included in your total reported balance to credit bureaus, so it will continue to affect your credit utilization until it's paid down.

Can missing a Plan It payment damage my credit score?

Yes. A missed payment is treated like any other late payment on your account and can be reported to credit bureaus, negatively impacting your credit score.