Interest free overdrafts affecting credit rating?

Konrat

I just wondered, and this has probably been asked before.. but does dipping into my student interest free overdraft adversely affect my credit rating in the future?

CLAPTON

no ...why should it ... using credit responsibly enhances your credit rating

but why you want a 'good' credit rating is a different question ..but worth asking

Blacksheep1979

well you want a good credit rating so that if ever you want to buy an expensive item such as a car or house etc that you get a good rate of interest. Whilst using credit responsibly and having a credit record is a good thing its not always good having lots of credit as if the company you are trying to get a new line of credit with believes that you already have too much/will be a risk you can be declined.

CLAPTON

the 'good' credit record for buying a house is quite different to that of a loan or CC.

So for a mortgage you want nothing adverse on your credit file and little or no debt.

However for getting loans and CCs you need lots of previous debt that has been or is being paid on a regular basis showing that you are a 'responsible borrower' that repays your debts.

And of course the last thing you want to do is to borrow money to buy an expansive car. Cars are probably one of the major reasons for the explosion of debt. Instead of paying silly interest for years for a car, save up for it and only buy what you can afford. Basically if you can afford the repayments on a loan then you can afford to save for it and pay cash. That way you gain interest whilst saving rather than pay interest on the debt.

Blacksheep1979

well if there are 0% interest deals on car finance its worth taking. And I'm not talking about those stupid yes car credit 30% apr type car loans - I'm talking about the kind of finance that almost anyone who buys a new car uses. And its wrong saying if you have loads of debt that you will more easily get another loan/cc as I said above you only need to have a credit history and a job which pays enough to cover the loan/cc. If you have loads of loans/cc's already (especially if taken out in a short period of time) you will be deemed a risk.

Konrat

But surely, a student overdraft is a special kind of 'debt'. It is interest free and does not accrue interest; would that be seen as responsible lending and won't put a bad dent on my credit? I'm capable of paying the money back as Martin's article suggests that those who can should dip into the OD and use them for savings.

I'm only asking in case I have difficulties in a few years time trying to get a mortgage on a house or additional bank accounts. I'm not likely to be getting loans or CCs.

Voyager2002

Blacksheep1979 wrote: »

well if there are 0% interest deals on car finance its worth taking. And I'm not talking about those stupid yes car credit 30% apr type car loans - I'm talking about the kind of finance that almost anyone who buys a new car uses.

That financial package costs the car dealer a lot. If you have a different source of finance you can ask for a cash discount that would be unavailable if you relied on their "interest-free" loan. So you end up paying for the loan in the form of a much higher price for the car.

TeaBoy_2

to answer the op's question, i dont think using the interest free overdraft harms your credit rating. i'm not 100% certain mind, but tried googling it and couldn't find anything.

aparantly opening lots of student accounts in a short period can harm your credit rating.

Blacksheep1979

Konrat wrote: »

But surely, a student overdraft is a special kind of 'debt'. It is interest free and does not accrue interest; would that be seen as responsible lending and won't put a bad dent on my credit? I'm capable of paying the money back as Martin's article suggests that those who can should dip into the OD and use them for savings.

I'm only asking in case I have difficulties in a few years time trying to get a mortgage on a house or additional bank accounts. I'm not likely to be getting loans or CCs.

Its still a debt and seen as you owe £x. But one or two of these won't matter in the long run. As a student barclaycard were quite happy to up my card limit to over 2.5k (which I asked ot be reduced) as I was using it and paying it off each month - that was ontop of a couple of interest free overdrafts.

The interest on the debt, be it 0% or 50%, doesn't come into the factor when looking at a new account (and am not sure if they can tell the interest rate anyway) its purely down to how much you owe already, how much you have borrowed recently and how good you have been with your credit so far.