Overdraft-Monthly-Credit Score

37866

Can paying of your overdraft monthly affect your credit score?

I have an overdraft of £2000 and plan to pay it off in four monthly payments of £500. The bank told me that this would have a negative effect on my credit score.

Is this true?

Any help would be appreciated.

Thank you..

Agricolae

Did they explain why it would impact negatively on your credit score?

I can't think of a reason why it would. Unless you're paying it off as part of a repayment plan with them.

37866

Thanks for the reply.

They said that each time you reduce your overdraft, they have to do an application which involves a credit assessment of you. The more of these you do, it can have a negative impact on your credit score.

I thought this to be very strange as I would be paying of debt which surly can only have a positive impact on your credit score.

I think I will continue to do so anyway. There probably just trying to squeeze more interest of me.:mad:

YorkshireBoy

37866 wrote: »

They said that each time you reduce your overdraft, they have to do an application which involves a credit assessment of you.

You misheard/misunderstood them.

They said/meant "overdraft facility". This is because they're one of the banks (NatWest is one) who, when you request a new lower limit, actually cancel the old one and make a fresh assessment for the new one.

If you're simply paying it down, there's no impact at all on your credit rating.

If, however, you're wanting to reduce the 'facility', wait until you've cleared it and then make the change. Or you could just leave it where it is and find some willpower from somewhere.

Agricolae

YorkshireBoy wrote: »

You misheard/misunderstood them.

They said/meant "overdraft facility". This is because they're one of the banks (NatWest is one) who, when you request a new lower limit, actually cancel the old one and make a fresh assessment for the new one.

If you're simply paying it down, there's no impact at all on your credit rating.

If, however, you're wanting to reduce the 'facility', wait until you've cleared it and then make the change. Or you could just leave it where it is and find some willpower from somewhere.

This is entirely correct. It is best to reduce the overdraft to a limit you're happy with, and then ask the bank to take it down to that limit.

Banks run a credit search if you ask to reduce your overdraft because they are risk-averse and would like to check that you still have the creditworthiness to maintain the credit facility you are asking for.