Will Planned Overdraft Ruin Credit Rating

Dan0811

Hi, I am 20 years old and work 38 hours a week, I went on holiday in the Summer and didn't quite save as much as I thought I would have, with all of the summer clothes shopping too I ended up asking the bank for a planned overdraft (Lloyds TSB). I am on the minimum wage which isn't great.. but my outgoings are just £158 per month, that is rent and my phone contract. The rest that I spend is totally down to me. My planned overdraft is at £800 and this week I almost hit that mark.

I am now wanting to clear it all, the holiday took a real bite out of my bank account, but being young and stupid I was just looking forward to a much needed break! I am 21 in 2 weeks so I will get an added £40 or so to my weekly wage which will help enormously.

I am just wondering if this planned overdraft will affect my credit rating in the future? Right now it doesn't matter too much but I don't want it affecting me in a few months or couple of years.
Also, any tips (other than the obvious don't spend all of your wages!) to get out of an overdraft? I definitely will not be getting a loan to pay it off, at least with my planned overdraft all I am paying is the £800 in bits and the extra charge/interest of just £10 at the most.

Sorry to go on, I have written down a week by week guide of how much I will have just taking out the rent and phone contract and if I didn't spend another penny then it would be paid off by this time next month, obviously though Christmas is around the corner and I also buy lunch at work. Is my planned guide thing a good idea? Shall I do a realistic one with how much I can budget myself to per week too?

I have also cancelled my Sky subscription (as much as I love football!) it just had to be done. That's saving me another £44 per month.

Thanks, from a stupid 20 year old ha ha! :rotfl:

P.S. Hope I have posted this in the right place, sorry if I haven't. Also, thanks for any replies.

Tixy

Hi

Being in a planned overdraft is not detrimental long term (whilst you are actually in it then it might affect you ability to get further credit).

Ideally don't go too near the limit, and make sure you never go over. Do you get out of the overdraft each month at payday, and then drop back into it?

Try to work on reducing the lowest point each month. Whilst it would be nice to clear in a month sometimes it can work better to not set too tough a target. Allow yourself a little bit for spending etc. Maybe you could set yourself a challenge to be totally out of it by 1st of January? (and not got back in to it)!

Dan0811

Well my pay is weekly so no I am not out of it with each pay, but I do move further away from it. Admittedly I have overspent in recent weeks which has pushed me so close to the limit, along with the bad timing of my rent and phone contract (which was £119 as I used it on holiday) makes the situation possibly look worse than it is as I know in a few weeks I won't be near it, I am just thankful I don't have much to pay out.

Yeah, I have never gone over the limit and this is the first time I have almost reached the limit which is why I am panicking a little bit.

That is true, it does seem like a tough target, I am going to reduce the overdraft by £100 each time, good idea? So tomorrow when my pay goes in I will reduce it to £700, then I will work like that until eventually the overdraft will be gone, as I say it, it was only for my holiday when I needed a big amount all in one go.
1st of January sounds reasonable enough, is there any danger that Lloyds TSB could just get rid of my overdraft at any time? I think that is my worry and why I want it gone as soon as possible.

Thanks for your reply!

Tixy

There is always a possibility that any overdraft can be recalled at any time. But that most often happens if someone goes over the limit or stops having their salary paid in or something similar.

The other time is the annual review point, when again they sometimes reduce or recall an overraft.

Dan0811

Okay, thanks. I have only had it since August so hopefully they won't check it too soon! Thanks for the tips Roll on 1st January when hopefully it is all gone! Goodnight!

Boris_Allen

Definitely won't affect your long term credit rating. There's a good chance that the availability of the overdraft on that specific account is based on transactional/behavioural scoring though. Essentially this means the more you use it, the less likely you are to get an extension and the more likely they will try to reduce it in the future - seems perverse doesn't it!

Anyhow, if for whatever reason they did decide to take it away, they'd give you sufficient notice of this, and I highly doubt they'd force you into unauthorised overdraft usage.

ABERDEEN_2

Dan0811 wrote: »

Hi, I am 20 years old and work 38 hours a week, I went on holiday in the Summer and didn't quite save as much as I thought I would have, with all of the summer clothes shopping too I ended up asking the bank for a planned overdraft (Lloyds TSB). I am on the minimum wage which isn't great.. but my outgoings are just £158 per month, that is rent and my phone contract. The rest that I spend is totally down to me. My planned overdraft is at £800 and this week I almost hit that mark.

I am now wanting to clear it all, the holiday took a real bite out of my bank account, but being young and stupid I was just looking forward to a much needed break! I am 21 in 2 weeks so I will get an added £40 or so to my weekly wage which will help enormously.

I am just wondering if this planned overdraft will affect my credit rating in the future? Right now it doesn't matter too much but I don't want it affecting me in a few months or couple of years.
Also, any tips (other than the obvious don't spend all of your wages!) to get out of an overdraft? I definitely will not be getting a loan to pay it off, at least with my planned overdraft all I am paying is the £800 in bits and the extra charge/interest of just £10 at the most.

Sorry to go on, I have written down a week by week guide of how much I will have just taking out the rent and phone contract and if I didn't spend another penny then it would be paid off by this time next month, obviously though Christmas is around the corner and I also buy lunch at work. Is my planned guide thing a good idea? Shall I do a realistic one with how much I can budget myself to per week too?

I have also cancelled my Sky subscription (as much as I love football!) it just had to be done. That's saving me another £44 per month.

Thanks, from a stupid 20 year old ha ha! :rotfl:

P.S. Hope I have posted this in the right place, sorry if I haven't. Also, thanks for any replies.

I was worried about this as well but I managed to get a mortgage with a £2000 overdraft (i was fully in it) so don't worry.

Dan0811

Thanks everybody, made me feel a bit better about it and pay day today definitely makes it look a little better, despite my phone and rent being taken out today! As it stands I am only £680 OD now but that'll probably be around the £700 OD mark until pay day next Friday, then after that my pay will be going up by £40 per week so definitely looking better.

Found it hard to resist going out tonight but hey, short term pain.. long term gain!

harrys_dad

Hi Dan, I am really pleased to see someone of your age starting to act so responsibly, well done. The key to avoiding debt is not to spend more than you have coming in. Whilst I realise everyone needs a holiday you do need to make sure that you can afford it. If you clear your overdraft by January 1st that will give you a few months to save up for the next one before you go and not get into debt. (And you have learned an expensive and painful lesson about mobile use abroad. It is much cheaper and nearly as good to keep in touch using internet cafes or free wifi ).

Keep us informed how you get on.

Dan0811

harrys_dad wrote: »

Hi Dan, I am really pleased to see someone of your age starting to act so responsibly, well done. The key to avoiding debt is not to spend more than you have coming in. Whilst I realise everyone needs a holiday you do need to make sure that you can afford it. If you clear your overdraft by January 1st that will give you a few months to save up for the next one before you go and not get into debt. (And you have learned an expensive and painful lesson about mobile use abroad. It is much cheaper and nearly as good to keep in touch using internet cafes or free wifi ).

Keep us informed how you get on.

Haha yeah, just wish I had acted a bit more responsible a few months ago before the holiday! I am hoping to save £100 a week. For the first 3 weeks of the month that should be fine, the last week though it will be a little more difficult.
Ha yeah, don't think I will be going on holiday next year... going to try and save, as useful as a planned overdraft is (and I would advise anybody to use it if they REALLY have to) you just have to make sure you aren't looking at it as your money. It is still borrowed money. It's very easy to look at your overdraft and look at what you can still spend, rather than what you still owe..

And yes, the phone abroad.. what a pain! Yeah I'll keep you all informed.