Overdrafts and credit ratings

bitterSTAR

Hi everyone, I currently bank with Barclays and have an overdraft that's over 5 times the amount I'm ever overdrawn by. I know that if I had a lower overdraft I'd be able to get a bigger loan from Barclays (but that's not something I want, I would rather keep the big overdraft for emergency payments). I am wondering what effect a big overdraft might have when I apply for credit cards or finance from another company???

moneysavingallday

Does your OD limit show on your CRA files? I ask because I know that mine does NOT.

bitterSTAR

moneysavingallday wrote: »

Does your OD limit show on your CRA files? I ask because I know that mine does NOT.

Yes, mine was showing on my Experian report when I checked it in August.

bitterSTAR

To further expand on my question (if it helps), my credit report has my bank account on it, a phone contract with o2, a phone contract with t-mobile, a barclaycard account, and an american express account. Plus maybe a settled BNPL deal (I don't know how long these stay on you file for?).

Jvic28

If it's showing on your report it may count against you. This is because it's credit that is available to you. If they gave you a loan and you suddenly used up your big overdraft you may not be able to repay the both, therefore increased risk. However, lots have lenders have different criteria so you never know, but you don't want to be making a lot of applications as this will also affect your "credit rating".

bitterSTAR

Jvic28 wrote: »

If it's showing on your report it may count against you. This is because it's credit that is available to you. If they gave you a loan and you suddenly used up your big overdraft you may not be able to repay the both, therefore increased risk. However, lots have lenders have different criteria so you never know, but you don't want to be making a lot of applications as this will also affect your "credit rating".

I don't intend to apply for any finance in the near future, so perhaps if say I was looking at applying for a mortgage or a loan I could just downsize my overdraft a couple of months before applying allowing enough time for the CRA files to be updated.

Also, I will be getting quite significant payrises every 6 months for the next 2 years - so by that time perhaps my overdraft won't seem so big compared to what I am earning?

On another note, my current overdraft is equal to my current monthly wage including overtime - does that seem quite normal?

Jvic28

TBH, I don't know what normal is. My overdraft was twice my monthly wage.

YorkshireBoy

I believe used credit (ie, debt) is a more important consideration when you are being scored for fixed term/amount credit such as mortgages, loans, BNPL, etc. Whereas available credit (as well as used credit) plays a more important roll when you are being scored for revolving credit facilities, ie credit cards and, to a lesser extent, overdrafts.

However, if your salary and other circumstances will stand it, your current circa 15% used/available credit ratio is not excessive in my opinion.