Any benefit to reducing my overdraft?

Phil3822

Hi all, I am trying to improve my credit rating and am nearly there however I have a £1000 overdraft which I rarely use. Occasionally did in by £20 here and there though, sometimes more. Overdraft is fees free up to £300. Would there be any chance of it improving my credit file/rating by lowering the OD to say the £300?

Thanks,

crazyguy

If you have an overdraft and it is not used and or low balance it should reflect quite well on a credit score and more so if you do not have other lines of credit ie: credit cards or loans with any balances outstanding.

In short if it is on your account and not used then leave it there as it shows that you are good with credit.

ses6jwg

It's a tricky one.

It shows as "avaliable credit" - so to a lender you could go out and spend £1000 of somebody elses money within 2 minutes if you wanted to.

On the other hand, you haven't, so this will look good.

From my experience in work - if somebody has a £1000 overdraft and hardly ever uses it, and has a good credit turnover through their account, we are usually willing to increase it to up to £3000.

On the other hand, if somebody has an ovedraft of £1000 and they are using it right up to the limit every month, even with a good credit turnover its likely the overdraft will be reduced at the next review.

Phil3822

Interesting, thanks for your replies. I have a credit card with £2150 limit that I rarely use as well. Use every few months tops upto £500. I like to keep it though for occasional spending when other money is tied up. The OD and CC are the only two forms of credit I have equalling just over £3k available on an income of just over £30K

crazyguy

To be honest if you have these lines of credit and do not max them out then in theory this should work to your advantage, but I suppose it is down to new lenders individual terms and critea when seeking further credit.

Phil3822

I previously had a very very poor credit file however everything has now dropped off. Wish to get a mortgage hence why asking the questions. I appreciate all lenders vary but it's helpful to get extra views. Thanks all.

YorkshireBoy

Phil3822 wrote: »

Wish to get a mortgage hence why asking the questions.

Mortgage lenders will not be concerned with available credit (your's is only 10% of your salary anyway), just debt, ie used credit.

It's a different matter with credit card and loan providers, but again, at 10%, your available credit will not be an issue on it's own.

ses6jwg

Just out of interest what is the "golden figure" with regard to avaliable credit vs. salary?

My salary is around £17,000 and my avaliable credit is around £6700.

crazyguy

ses6jwg wrote: »

Just out of interest what is the "golden figure" with regard to avaliable credit vs. salary?

I dont think there is a concrete figure for this anymore.

YorkshireBoy

ses6jwg wrote: »

Just out of interest what is the "golden figure" with regard to avaliable credit vs. salary?

My only experience of this, as opposed to used credit (which many on here seem to believe 50% is the max), is a figure of 85% which was given to me by a NatWest credit card underwriter last year.

Catapa

Phil3822 wrote: »

Overdraft is fees free up to £300.

I would reduce the overdraft to the fee free £300. This also gives the bank (£700) more room in case you want to apply for a loan with them.