Should I Increase My Overdraft?

md_
md_ Posts: 2 Newbie
edited 20 February 2018 at 2:30PM in Credit file & ratings
Hello,

Sorry for the long post, I was just wondering if I could have some advice.

I'm in my mid-20's and looking to buy my first house in the next 6 months to a year and so am currently trying to sort out my credit rating which I have stupidly neglected for the past few years... At the moment Experian has it as "Good" (2 points off "Excellent") and the only thing that is letting me down is my available credit (I have never missed a payment, I'm registered on the electoral roll, lived in the same house for 15+years, have had my accounts for a long time etc).

I currently have:
Credit card 1 - £250 used, £500 limit (I paid this off yesterday so will be closing the account within the next month when I ensure all the payments are covered but the balance is still showing on the account at the moment, which is why I am including it here)
Credit card 2 - £1,200 used, £1,500 limit (I got this a week or so ago as a balance transfer - not currently showing on my credit rating. It is a 0% card)
Credit card 3 - £12 in credit (as in they owe me), £1,200 limit (I had maxed this out and like a moron, I didn't change to 0% so I was paying off essentially nothing a month, so I moved this last week - balance hasn't updated on my credit rating yet)
Overdraft 1 - £1,700 used, £2,000 limit.
Overdraft 2 - £0 used, £250 limit

I have money in savings and other accounts which are not in their overdraft, so I have no need of an overdraft to fund my life and I am aiming to pay off the £1,700 in the next 6 months along with the £1,220 balance on the card.

I have just seen though that my bank will double my overdraft 1 if I want them to, and I am wondering if I should do this? The only 'negative' comment on my Experian Credit Rating is that I am using a lot of my available credit. Now I have the additional credit card, I am no longer using such a large percentage of my credit and I plan to keep my other card open and occasionally use it for this reason (I have now changed it to pay off the full amount automatically...!)

I was wondering if doubling my overdraft would help increase my credit rating as it would essentially add an additional £2,000 of credit available to me that I wasn't using?

There isn't much risk of me actually spending it as I do not use the bank account that has the overdraft. I have moved over to Monzo for my generic spending as I like the budget aspect of the app and I have a joint account with my partner for bills, food, general living expenses etc. so essentially I am just leaving the account as it is to pay off the overdraft (money is still going into the account). I essentially got into this situation with my overdraft because I maxed it out as a student and then stopped really using the account when I moved in with my partner and didn't really consider that leaving it in the red would effect my Credit Score (stupid I know).

Thanks in advance for any advice :)

Comments

  • The only real issue is being in your overdraft.

    Get out of that and ignore the Experian rating and their suggestions. No one seems or uses their ratings.
  • Candyapple
    Candyapple Posts: 3,384
    First Post First Anniversary Combo Breaker Intrepid Forum Explorer
    Forumite
    Ignore any scores or ratings and concentrate on making sure that your data is correct.

    If you are going to be applying for a mortgage you need to make sure all your data matches across all 3 agencies.

    The free versions to check your credit files are below:
    Experian: https://www.moneysavingexpert.com/creditclub
    Equifax: https://www.clearscore.com
    Call Credit: https://www.noddle.co.uk


    In your shoes I would:

    1. How long have you held CC1 for? If it's for a long time, don't close it and just keep it empty. If it's not long, close it.

    2. Clear CC2 off before you apply for your mortgage then close it.

    3. Use CC3 for minor monthly spends such as petrol or food and then clear the balance every month so you don't pay any interest.

    4. Clear this overdraft 1 ASAP then call the bank to close your overdraft.

    5. Do nothing with overdraft 2.

    Your credit utilisation is not the problem here, and it should all balance out once your files have been updated. Just concentrate on getting those monthly green ticks by making sure you run a credit card properly and staying out of your overdraft as soon as possible.
    I'm a Board Guide on the Credit Cards, Loans, Credit Files & Ratings boards. I'm a volunteer to help the boards run smoothly, and I can move and merge threads there. Any views are mine and not the official line of moneysavingexpert.com
  • DCFC79
    DCFC79 Posts: 40,598
    Name Dropper First Anniversary First Post
    Forumite
    Dont get too used to your credit rating, only you can see it, lenders see your credit history which is your history at paying bills etc.
  • Thank you so much for your replies, they were really helpful. I think I will just pay it off and close the overdraft as suggested. Thank you :)
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