Can having an overdraft effect your credit rating?

*Kat*

I need to get a better credit rating, I've had one default which I want to full and final settle it (but want it to be removed from my credit report) can that happen?

Other than that, I have my mobile phone and my OD (£500).

How can I use these to make my credit report better?

Tixy

Its possible for your creditor to remove a default - but they are unlikely to agree to do so.

Paying the mobile phone on time every month and assuming you have never missed a payment might gradually make it easier for you to get other credit products. But if the default remains then you will struggle to get any new mainstream products, even once its paid.

Regular use of an overdraft can have a negative impact - it appears to other potential lenders that you cannot live within your income each month (and therefore will probably struggle to repay any money they lend you). Occasional use of a small amount of the overdraft, paid off in full the following month probaby would not be a major issue.

Have a read of this for other ways to improve your chance of being accepted for credit - Credit Rating: How it works and how to improve it...

*Kat*

Really? I thought if you paid it, it'll become "settled" or something? I'll have a read Thanks, how often do banks send info to the credit reporters?

DebtFree2012

If you pay it off in full it will be settled however if you come to an agreement and don't pay the full amount, it'll still register as a default I believe as you have not met your initial credit agreement. I have not had this done to myself so can't say for 100% sure.

My credit report is updated monthly for active accounts.

DebtFree2012

Meant to say - my overdraft (paid in full each month) doesn't have any impact on my credit score.

*Kat*

Oh nice, thank you, I'll just pay in full then it's not that much but will take a couple of months for me to save the amount

Tixy

If you pay off the account then it will be shown as a satisfied default - but even with a settled default you will find it hard to get mainstream credit until it has dropped off your file.

If you offer a reduced full & final then they may well only agree to mark your file that shows you offered a partial settlement (although the default will still show as satisfied/no balance outstanding).

Sometimes people are able to get a creditors to accept a reduced payment in full & final, but mark their file as though they paid in full.

But in all cases you will struggle to get mainstream credit whilst its clear from your file that you did default on a credit agreement in the past 6 years.