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Will upgrading to the American Express Platinum card hurt my credit?

A: As I said earlier, upgrading between card products should not hurt your score. However, something just came to mind. If you upgrade your card to a Platinum card at American Express, and the upgrade is not done properly, it can result in two tradelines being reported on your credit report (I recommend that all American Express upgrades are done over the phone -- that way you preserve your card number and you don't end up with two tradelines on your credit report). It's not unheard of, for example, to accept the upgrade online and then see that your credit report shows your old card and your new card. The old card reports as closed and the upgraded card is reported as open. Because this is American Express we're talking about, though, this might not be a bad thing. Indeed, if you've got an old American Express card -- your new American Express card will reflect the age of your oldest card.

Not familiar with American Express's backdating policy? Here's how it works. If you had an old American Express card that you opened back in the 1980s (or whenever), and you apply for a new card today, your new card will reflect the age of the old account. That's great because it will be reported to the credit bureaus that way. Think about it. How nice would it be to apply for a card today and be able to pick up 30 years of history? Assuming you opened a card in January of 1982, and opened a new card today, here's how the new card would show up on your credit report: Date Opened 04/1982. It would reflect the year of the old card and the month in which you opened the new card.

Some customers have abused this situation, though (makes me wonder if American Express will eventually change its policy). Realizing that American Express does this, some customers have opened a handful of cards so that they can manipulate the FICO scoring model. Average age of history is part of the FICO calculation. A simple example will show you how opening multiple American Express cards can benefit your FICO score. Let's say you have three credit-card accounts on your credit report. One is an American Express card -- opened 15 years ago. The other two cards are from Bank of America and Chase, respectively. Those two cards were each opened a year ago. The three cards, then, have an average age of 5.7 years (15, 1, and 1 -- divided by 3 cards).

Now let's say that you open a new American Express card today. Because of the backdating that American Express does, you'll have two American Express cards that show an age -- on your credit report -- of 15 years each. Let's do the math again. Now you have four cards. Two cards have 15 years of age and the other two have a year of age. The average age for your four cards is now eight years. You gained 2.3 years by applying for a new American Express card. Instead of the average age falling when the new account was opened, American Express's policy has allowed for the reverse.

This simple example shows how an American Express customer can game the system -- and some do -- when it comes to FICO's age calculation.
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