Removing a large, new used overdraft from non-main bank account

dezza

I have a £5000 overdraft on my RBS current account, which has never been used and, hopefully, I have no intention of using given the associated usage fee and interest. I have other current accounts with smaller, 'cheaper' overdrafts which would be adequate should an unforeseen expense occur.

The RBS account isn't used all that often and there isn't a great deal of money kept in the account. Given this, would it be a good idea to close the account - or would such a sudden drop in available credit look bad on a credit file?

Thanks.

redcard

My belief is that it would increase your credit worthiness by 1.6% short-term, but damage it 2.6% long-term.

dezza

redcard wrote: »

My belief is that it would increase your credit worthiness by 1.6% short-term, but damage it 2.6% long-term.

Is there some kind of formula to work this out?

Thrugelmir

If you have no need of the account. Close it is my motto.

Won't impact your credit file in terms of your ability to borrow by itself.

InsideInsurance

dezza wrote: »

Is there some kind of formula to work this out?

They are taking the micky.

A) There is insufficient information to be able to really comment
Every lender has their own preferences and so there is never one correct answer

When lenders decide if to give you credit or not they will look at a whole host of factors and many of them can be slightly conflicting. So for example, they'll see how much other lenders trust you and so having a large limit from a lender for some time can give them more comfort than lots of small limits. On the flip side though they also work out if you could afford more debt if you were to max out all the lines you already have and so having a large unused limit can be bad unless you have a very large income.

Ultimately you need to look at the bigger picture, how many other lines of credit you have, what their limits and ages are etc and then balance the two off.

Of cause the other question, are you even looking to get more credit in the near future? If you arent then its all a fairly mute point.

dezza

Thanks for the serious answers - I'm not looking to get more credit in the near future, however I am looking to switch to a different credit card once the 0% interest rate comes to an end in March, so hopefully anything I do now won't impact on that too much.
No way of knowing of course, but come account review time in February RBS may well decide to reduce or remove the unused overdraft, so I'll probably look to reduce or remove it soon, or close the account altogether.

InsideInsurance

dezza wrote: »

I'm not looking to get more credit in the near future, however I am looking to switch to a different credit card once the 0% interest rate comes to an end in March

Depending on when in march then that is only possibly 3 months away and given CRAs can take over 2 months to update, that is in the near future

camperdown9

Hi

I have a similar question.

I have a natwest account with an unused £750 overdraft facility. I don't really use this account at all except to cash the odd cheque from time to time.

I could close this account as i guess I don't need it. However other than credit cards its the only form of credit that I have available. As I don't work anymore and just have the allowance that my partner gives me I guess its unlikely that any bank is going to give me an overdraft if I was to apply now.

I guess the question is it better to have a number of current and savings accounts with a little money in each. Or have just one account with savings and one with day to day money in it?

Alex

jonesMUFCforever

OP imagine for one minute a catastrophe happens and you need immediate funds.
This overdraft gives you this while you sort something else out and is free until you use it.

Just something to consider.

Thrugelmir

camperdown9 wrote: »

I guess the question is it better to have a number of current and savings accounts with a little money in each. Or have just one account with savings and one with day to day money in it?

Alex

In a practical sense one current account and one main instant savings account should be sufficient for most people. Why have the hassle of moving money around. Unless you are playing the current account incentive game.

Sharon87

Thrugelmir wrote: »

In a practical sense one current account and one main instant savings account should be sufficient for most people. Why have the hassle of moving money around. Unless you are playing the current account incentive game.

Just in case you lose your bank card maybe? or it gets blocked? Having a second or third bank to rely on is a good back up.

OP can't you keep the overdraft but maybe reduce the limit to 1k or 2k, so it's there for any emergencies?