Worried about the future

Audrey_Hepburn_2

Morning everyone. Newbie here!

I stumbled across this site after checking my bank balance and discoverying that I am once again £1,500 overdrawn with two weeks till payday. I know this might not seem like a lot of debt to some of you (I've already read some pretty scary strories :eek:) and I'm not all that savy in the world of finance, but if my budgeting goes to plan and I don't relapse into my usual spending habits (self confessed shopaholic with a New Look directly scross the street from my office!!) Will this have a good affect on my future credit rating?

I have a credit card that has a limit set to £400 (anymore would be too tempting. It's only for occasional purshases) that I've set up a direct debit to pay £50 in every month regardless of how much I spend on it -I'll usually add another £100 each month anyway) I also pay a phone bill that has never been late or outstanding and used to have a gym membership that was always paid on time until I packed it in after realising I almost never went!

I also have very little in the way of savings, but a large inheritance that I'm allowed to have when I'm in a position to buy my own place. At the moment though I'm still with my mum.

By taking action now am I likely to still be able to get a good credit rating/score??

I'm so baffled! No one has ever explained these things to me.

Thanks.

Tixy

Hi and welcome to MSE

Is your key concern the level of your overdraft or your credit rating for the future?

It sounds like you have your credit card pretty much under control but that your overdraft is your biggest issue.

What is your current overdraft limit? how far do you tend to go into your overdraft each month? when your salary is paid in does your bank account tip back into a positive balance?

Generally potential lenders see being in your overdraft all the time as a negative, although obviously its if you go over your overdraft limit that can be a real problem.

You say you have a budgeting plan in mind, have you work out a monthly budget and tried to work out how much you can reduce the amount you use your overdraft each month? If not then I would start by writing out a budget so you can see what should be achievable.

dancingfairy

Your credit rating is made up of many many things - including whether you are on the electoral role at your address, how long you've lived there, how much you owe, how good or not you are at paying etc etc. It's on a sliding scale.
Having an overdraft is not hugely great - it's not going to look great on your credit file if you're using it every month but on the other hand it's nowhere as bad as having a CCJ or going bankrupt for instance. I'd not worry overly about your credit file per se - more about trying to get debt under control and to a more manageable level.
It's also a bit weird as having some credit looks good so they know they won't be the first person to lend to you and in some instances missing the odd payment means the banks like you as they are more likely to make money out of you in interest etc - although this is not a stragety I'd recommend
Your credit file is probably not too bad from what you've said although no doubt by getting the debt under control it will improve over time anyway.
I'd also point out that there's no point having your credit card under control if you running up more on the overdraft anyway - you need to tackle it all together.
best of Luck
df

allybee101

Hi,

Welcome to MSE!
Dancing Fairy has done a good job of explaining how credit ratings are worked out.
There are also lots of people on here with plenty of great advice who can help out with just about everything!
Well done for getting your budget sorted. You might want to think about things that will help you stick to this,
e.g if you have a habit of popping into New Look on your lunch break try leaving your purse at home and just bring enough cash in your bag for bus fare, parking, cup of tea (the essential stuff you need). If your cards are at home you'll be less likely to spend anything.
I'm sorting out my overdraft (way bigger than yours!) as I let it slide and the bank just kept increasing my limit. Now I try and keep on top of it - checking online banking daily, planning spending and budgeting. I'm slowly reducing the negative and hope to be clear of it by December 2012 (possibly a bit optimistic but I'm working on it!). I plan to request another limit reduction in the next month or so.

You mention you have a few accesible savings, as your CC and overdraft probably have a higher interest rate than your savings are earning, why not use them to make a dent in your debts?
Good luck!

NeverAgain_2

No point in having savings and debts - you are paying interest on your own money.

Nothing wrong with keeping something for a rainy day, but you should use the rest to clear your overdraft and credit card.

Why worry about your credit rating?

You have already spotted the pitfalls of borrowing, and you already have access to sufficient credit for your needs.

Keep your nose clean, as you intend to do, and your credit rating will look after itself.