Does using your overdraft look good or bad?

Stephen_C.

On your credit file, does it look 'good' to be using your overdraft? I remember Martin saying lenders look for profitability as well as stability when looking at your credit report.

I have a 0% student overdraft, so it doesn't cost me anything to use.

YorkshireBoy

If you're using an overdraft, especially regularly or constantly, then you're living beyond your means...surely!?

Stephen_C.

YorkshireBoy wrote: »

If you're using an overdraft, especially regularly or constantly, then you're living beyond your means...surely!?

I just put the money in a savings account, but if it looks bad on my credit file then I'll stop!

CKhalvashi

It looks as though you're living beyond your means; that's why I use my CC for 0% stoozing, but never an interest free overdraft.

CK

RuthnJasper

If you use it only occasionally and in general keep your account in good standing you'll be OK. Be warned though, it may be cheaper for "now and again", but if you don't keep your eye on your incomings and outgoings it can be a slippery slope into the financial abyss...

Best wishes.

CherlokHomes

Since Ive been in my overdraft my loan quote has gone down from 11.4% to 9.9%.

Does going into your OD look bad, I personally have never believed this as it's never effected me or my OH as we get offers from our banks on a regular basis and never get turned down for credit.

CKhalvashi

Innovate wrote: »

Since Ive been in my overdraft my loan quote has gone down from 11.4% to 9.9%.

Does going into your OD look bad, I personally have never believed this as it's never effected me or my OH as we get offers from our banks on a regular basis and never get turned down for credit.

Possibly because the bank wants it as long-term, structured debt.

CK

grandplonker

Using OD at all is ALWAYS bad. I used by OD for 4 years straight at Uni. When I graduated, I couldn't get a loan. My life was much easier once I cleared it.

Using an OD once every three months isn't as bad, but still bad.

Your balance sheet will look far, far better by keeping at least one credit card, using it monthly, wisely, always paying off; and keeping a never used OD. Buy a triple agency file from CheckMyFile and you'll see what the limit is and what was actually used.

lordash

Yes, having overdrawn accounts is indeed bad.

Tip: The balances that get reported to Experian/Equifax/CC are the balances of the accounts at midnight on the last day of the month (at least in my experience). If you have your overdraft balance in instant access savings you can transfer the money in on the last day of each month and then transfer it back on the 1st, thus keeping ~97% of the interest you would've earned anyway whilst reporting a £0 overdrawn balance.

It is also a good idea to do this, just to show the bank account provider that you are turning over a balance on the account. However, if you are not using the account (other than the overdraft) then do not expect your internal bank score to be too great as banks like to see an average credit balance, regular transactions, direct debits, etc. However this score is not published externally and is not likely to affect you in the long term.

CherlokHomes

Using an overdraft is no different to having a balance on a credit card and sometimes cheaper.

If people say going in to an overdraft then it's living beyond your means then anyone who's got a balance on their credit card is also living beyond their means.

YorkshireBoy

Innovate wrote: »

Using an overdraft is no different to having a balance on a credit card and sometimes cheaper.

All things being equal, you usually get up to 56 days interest free credit on the credit card, whereas you don't on an overdraft.

If people say going in to an overdraft then it's living beyond your means then anyone who's got a balance on their credit card is also living beyond their means.

Overdrafts are intended for short term borrowing (see their "repayable on demand" condition), whereas credit cards are designed for longer term borrowing...ideally up to 56 days, but spread over a longer term if necessary, and are NOT repayable on demand (except in special circumstances).


I disagree with your assertion, but as it is we're both only expressing (unqualified?) opinions. You'd need to ask an underwriter (especially one underwriting mortgages) for the facts, but I'd put money on a constant/regular overdraft balance being viewed far more negatively than a similar sized credit card balance.