Student Overdraft & Credit Rating/Score

DropsOfJupiter_2

Hey all,

I have set-up a student current account with an overdraft of £1000 per year at a high street bank. My course is 5 years long. I intend to use the interest-free overdraft in an Instant Access Cash-ISA (2.0%). The bank has told me that I can repay my overdraft a year after I graduate without incurring any interests.

I plan to obviously put back the £5000 (overdraft x 5 years) just before the agreement expires into the student bank account (but don't intend to upgrade into a graduate student account). I was just wondering if my credit score/credit rating will be affected by this kind of borrowing history?

Thanks for any input/insight given. I'm all new to this. Cheers, thanks in advance.

izools

Having a large overdraft balance will indeed affect your credit worthiness as will having a overdraft balance of very close to (or indeed at) the limit on the account.

The main concern you should have though is that with no day to day activity on the account the bank will likely withdraw the overdraft and may even close the account.

Lokolo

Banks rarely offer the full overdraft, so you will be very unlikely to get a £5000 overdraft by Year 5.

The_Boss

You don't have what you think is a credit score/rating so by default it cannot be affected.

izools

The_Boss wrote: »

You don't have what you think is a credit score/rating so by default it cannot be affected.

Hence I was careful to reply to OP with "creditworthiness".

It is true that having a constantly maxed out overdraft will likely reduce "creditworthiness".

You-kip

izools wrote: »

Hence I was careful to reply to OP with "creditworthiness".

It is true that having a constantly maxed out overdraft will likely reduce "creditworthiness".

For some maybe Izools but not everyone as each persons individual circumstances are different.

katy89_2

Are u sure its an increasing 1000 per year? Are you sure it's not max £1000 for every year so it's not increasing its just staying the same. Theres a lot of students that would blow £5000 and not bat an eyelid paying it back, doesn't seem good sense by the bank offering an o/d that high. Not saying you would blow it. X

The_Boss

izools wrote: »

Hence I was careful to reply to OP with "creditworthiness".

It is true that having a constantly maxed out overdraft will likely reduce "creditworthiness".

As 'Kip says, it will vary from lender to lender. BUT personally I can't see how it looks good on any credit files.

GoldenShadow

Yeah I'm pretty sure its not 1K a year in that sense.

With HSBC when I took mine out it was up to 3K OD and year one was up to 1K, then 1.5K in year two, 2K in year three, and basically the 3K was if you did a 5 year course and whether they agreed to put it up each time or not. They can decide you can't have any more or cancel it at any point etc.

But saying that its not you take the 1K and next year get that again. You are 1K down if you take 1K out, and therefore cannot take anymore out unless they increase the OD. I have never seen a student OD offer of 1K increasing by 1K per year. Its usually something like an extra £250-£500 a year maximum.

I have looked at stoozing and I don't think its worth it tbh. I've never found anything conclusive to know how OK or not OK it looks and I'm not really willing to risk it considering interest rates are as piddly as they are anyway. My student overdraft is £1250 and its rare I use it but I like having it more than anything as its useful before payday/vet bills etc.

vics199

Now don't everyone shoot me down here but I really wouldn't worry too much about your student overdraft as long as you stay within the limits. I have been in my student overdraft for 9 years and haven't been a student for the last 6 years. As long as you are paying your student loan into that account and as long as you pay your salary in to it after you graduate and your monthly income is more than your overdraft then they won't take it away from you as you can support it. Obviously if you did get a £5,000 overdraft then you would need to get that reduced down after graduating as they wouldn't let you keep that for too long.

But back to the credit file thing - with a £1,800 overdraft I have a mortgage, 3 credit cards, a loan, a hire purchase and a range of other things such as phone contract etc and settled finances. I'm not saying freely get into as much debt as I did/am (which I am clearing at a good rate), I'm just saying that compared to credit cards and loans, overdrafts don't have as much an impact when applying for things like mortgages and loans.