Does being in your overdraft affect your credit rating?

elsupremo1912 · 17 November 2009 at 5:20PM

I constantly use my overdraft. I have an £800 o/d and I am constantly in it. I have an ultime reward acount at HBOS so I dont get charged £1 per day as I would if I had a current account (is that correct? that is how I was sold it).

I have a spare few hundred quid that I am going to reduce debt. Should I concentrate on my overdraft or credit card? my credit card is a very low rate of interest, I am only charged about £1.50 interest per month, as I pay more than the minumum.

noh · 17 November 2009 at 5:40PM

Recently you would have received details of Halifaxs new charging structure. Here from page 55

You will be paying £1 a day from 6th December for overdrafts of between £300 and £2500.
You still have the £300 free overdraft so your best course of action is to reduce your overdraft to below £300.

Paul_Herring · 17 November 2009 at 9:50PM

Does being in your overdraft affect your credit rating?

Not substantially if you stay within the agreed limit.

I have a spare few hundred quid that I am going to reduce debt. Should I concentrate on my overdraft or credit card? my credit card is a very low rate of interest,

I'm guessing that the OD rate is higher - concentrate on that.

LeeSouthEast · 17 November 2009 at 10:07PM

Affect it: Yes.
How: Depends who is analysing the data.

If you stay inside the agreed limit and terms & conditions, it'll be just like any other form of (well serviced) loan.

elsupremo1912 · 17 November 2009 at 10:40PM

noh wrote: »

Recently you would have received details of Halifaxs new charging structure.
You will be paying £1 a day from 6th December for overdrafts of between £300 and £2500.
You still have the £300 free overdraft so your best course of action is to reduce your overdraft to below £300.

I didn't know that about my OD:mad: Will I be allowed to switch back to a current acciunt do you think?

noh · 17 November 2009 at 10:56PM

The new charging structure applies to all Halifax bank accounts except Student accounts and the Easycash account.

See this previous thread.
http://forums.moneysavingexpert.com/showthread.html?t=1986907

You will have been informed of these changes in the last few weeks.

elsupremo1912 · 18 November 2009 at 12:09AM

Aye but I wont get charged £12.50 per month on a current account as well.

jambosans · 18 November 2009 at 12:22AM

elsupremo1912 wrote: »

Aye but I wont get charged £12.50 per month on a current account as well.

Just to clarify: HBOS have three current accounts as of 06/12/09, the Standard, Reward and Ultimate Reward Current Account. Only the latter charges £12.50 per month, however all three will have the same overdraft charging structure (except the first £300 of the URCA which will remain fee free).
You have a couple of options:-

Clear the overdraft completely and downgrade. If you funds £1k or more in a calender month you can downgrade to the Reward Current Account and get £5 per month, otherwise you will need to downgrade to the Current Account - which will be relaunched on 06/12/09 to existing and new business.
Clear the overdraft to within £300, and continue paying £12.50 with unlimited overdraft usage up to the £300 fee free limit. Also, as of 06/12/09, funding £1k or more will qualify for the £5 Reward, reducing your account fee to £7.50.
Or, if you are an existing HBOS credit card customer you can transfer the balance from the overdraft onto the credit card at the purchase rate (credit limit allowing). This may help you reduce the monthly fees you pay.

There are other options, but those are the main ones, I would suggest you read the guide noh has linked you to as it gives much more detail on the changes, and some more advice.

elsupremo1912 · 18 November 2009 at 7:38PM

Thanks for the help everyopne.

partizan · 21 November 2009 at 8:08PM

Many lenders are moving away from credit scoring or are complementing it with affordability criteria - on a big loan (say for a car) they may well ask for bank statements and if you are continually in your overdraft this may indicate you cannot afford the new debt.

Paul_Herring · 21 November 2009 at 10:14PM

partizan wrote: »

Many lenders are moving away from credit scoring

I seriously don't think they are. They'd be mad to. Then again, given their behavour over the past 2 years....

or are complementing it with affordability criteria - on a big loan (say for a car) they may well ask for bank statements and if you are continually in your overdraft this may indicate you cannot afford the new debt.

With respect (that well worn phrase, used by money grubbing politicians) you're talking rubbish.

In the 'global' view of a credit report, an overdraft isn't going to sway a 3rd party opinion either way unless it's being abuse/overused (i.e. the customer is breaching the limit or are continually near the limit.) The fact that there's an overdraft (and it's being used) is not going to materially affect a 3rd party decision on whether to give a line of credit.

Does being in your overdraft affect your credit rating?

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