Building up credit history - should I take up overdrafts?

taless

Hi guys,

I am an international student studying here in the UK. I am currently planning to settle here in the long term, so building up my credit history is one of the things that I pay attention to. As an international student, I am not eligible to open student accounts with interest-free overdrafts.

Basically, today I went to NatWest for some dealings, then halfway through, I just asked them, "Could I just know if I am eligible for an overdraft? Just like to know only, please don't perform any credit checks!" They said sure and looked at mine and referred me to a manager. The manager said they could offer me a £500 overdraft immediately. He asked me do I want that? I said I'll think about it, and he said come back anytime with my passport and visa if I'd like to!

This is the credits that are available to me:

LTSB Classic Account (Opened Nov 06) - £200 OD (applied May 07), £0 used
Classic Credit Card (Opened May 07) - £1000, uses about £150/month, repays in full each month

Natwest Student Credit Card (Opened Oct 05) - £350, uses about £100/month, repays in full each month
Natwest Current Plus Opened (Opened May 06)- can take up £500 OD if I want!

Basically I am not planning to use any of my ODs, but merely just to show that I am a responsible borrower.

I am aware that to build up a credit history, we need to show that we are able to manage credit. As I may be applying for loans in the future, I would hope to also have a good record with Natwest, so that if they offer better deals in the future than LTSB, I could take them up!

But on the other hand - will I appear to be 'credit desperate' or 'credit hungry' if I get an overdraft from Natwest now...? And will that be a bad thing in 4 years time (that is when I graduate - and perhaps starting to look for housing, cars, or education loans!)?

If all these appears on my credit file, that will mean 3 searches in a month! But the funny thing is, I applied for the 30-day trial with Experian, and they don't seem to be able to generate my report right away - they need me to send statements to them! (that was 2 months ago - so do the banks actually report me to the credit agencies?)

Any input will be greatly appreciated!! Thanks.

techno_geek

NatWest don't report their current accounts to credit reference agencies - if you were to take up their offer of a £500 overdraft, then it wouldn't affect your credit rating (except for the search they carry out with Equifax).

taless

Hey Techno_geek,

Thanks lots for your reply.

For the short term and long term, do you think applying for that overdraft will be beneficial or not (except for the reference regarding credit search)?

More specifically - do you mean the overdraft will not be reported, hence will not affect my dealings with other banks (i.e. they wont be able to get information about how well I managed the account)?

But in terms of the internal Natwest scoring, the overdraft, if well managed, will be of benefit in the future if I were to apply for loans from Natwest, is that right?

Thanks!

techno_geek

Because you have an overdraft and credit cards elsewhere, that will build up your credit history nicely so Natwest won't really matter that much to be honest. Note that their credit card will show on your credit report.

Because Natwest's overdraft won't show, it allows you to have a "secret reserve" of credit... if they're offering it to you, then you should take it - they can be difficult when it comes to overdrafts sometimes (I pay over £3000 into my natwest account each month, and they still won't increase my overdraft above £1400!) I only pay £1500 into Nationwide each month and they increase my limit by about £200 every month!!!

A Natwest overdraft will be useful when building up an internal credit score with them, especially when it comes to increasing credit card limits!

taless

Thanks heaps for your very helpful information Techno_geek.

With regards to Lloyds, do they actually report unutilized overdraft? I read that although I have a 200 agreed overdraft, I am not using any, hence it won't show up on my credit report. Is that true or a fallacy? (I was personally hoping that both will show up, i.e. 200 agreed, 0 used as I thought that will be more useful!)

techno_geek

taless wrote:

With regards to Lloyds, do they actually report unutilized overdraft? I read that although I have a 200 agreed overdraft, I am not using any, hence it won't show up on my credit report. Is that true or a fallacy? (I was personally hoping that both will show up, i.e. 200 agreed, 0 used as I thought that will be more useful!)

Not sure on that one - I'm sure someone else might be able to answer that question! I know that Nationwide will show up like that, i.e. 200 limit, 0 used
I would imagine Lloyds do that as well...
Incidentally, HSBC report their accounts but not any overdraft information (even if there is one on the account!)

ScarletBea

Sorry to barge in on your thread, but in a way this is important to me too.
Did I understood correctly, that for a good credit history it's good to accept overdrafts, even if you're 100% certain you're not going to use them?

smithja

Someone posted that LloydsTSB do report current account conduct with overdrafts and gave an example of what it looks like on Experian, I was the one who asked the question. I would also like to see it on my report, to build up my credit rating.

taless

I went into NatWest and walked out feeling utterly cheated by the manager that I have been talking to that day.

He told me, actually the £500 overdraft is only available if I were to open an Advantage Gold account with them. If not, I could only have £50 overdraft with a normal current account.

I told him I am not interested in fee-paying banking at the moment. He said I could actually sign up for Advantage Gold, and he will be able to grant me £500, and if I were to cancel it in the near future, I will still have the £500 overdraft.

I said I will consider that, but for the moment, I will go for the £50 overdraft then.

So yes, I do feel absolutely conned. Just as I was about to post a post that actually, Natwest isn't as bad as I thought they are (by willing to grant £500 overdraft), I feel utterly disgusted by his behaviour.

My question is - is the 'applying for an Advantage Gold account and then cancelling it and keeping the £500 OD' a good idea (I will only do that in say 6months, not immediately if I ever do it)?

olly300

taltess lots of banks have been trying this on i.e. trying to force people into taking fee paying bank accounts by any means possible.

If you open a Advantage Gold account I bet you they will refuse to allow you to close it in 6 months as they will pretend they haven't received your letters or make up other excuses why you can't close it.

Myself and a few other people I know have had similar problems with Natwest and other members of their banking family.

Your best bet is to be forceful, including writing a letter of complaint to head office with that particular managers name on it, and make it clear that you will close the account and take your business elsewhere due to his behaviour.

They will either give you the overdraft sending you loads of leaflets every month of the advantage of their fee paying account, or if they don't take your business elsewhere.

sinizterguy

Just get a credit card, use it and pay it off regularly. Thats all I did.

I was an overseas student too. The main problem is moving every year and having different addresses. If you can use one permanent address it makes it easier too.