Will extending overdraft increase credit rating?

kirstybum

Hi there,
I've recently been refused car finance as expected due to the old default on my credit file, paid off and for the measly amount of 200 pounds but hey.
My bank have now sent me a letter offering to increase my overdraft from 750 to 1350. I was wondering if this will increase my credit rating at all considering it's the only credit I have minus a phone contract. I was thinking it'll be better to apply now while my score has already lowered from the previous application.
Thanks in advance.

Tixy

The small increase in the overdraft limit is unlikely to make much difference to your ability to get credit.

Don't worry about your score going up or down by a few points, nobody sees the score but you. Potential lenders will assess your file against their own lending criteria.

Caladan

I may be wrong on this, but don't lenders also look at your current borrowing against your available limits?

For example, saying you have a £1k credit card limit, but you only borrow £500 (50% of limit) is better than having a £500 limit and borrowing £500 (100% of limit).

So a higher limit that you don't use could, in theory, make you look like a safer bet than someone who has lower limits but utilises them to the max, even though you're actually borrowing exactly the same amount.

kirstybum

Thank you guys that's what I was thinking, the percentage would go down I'm gonna extend it at the end of the month

vacheron

I wouldn't be so hasty as lenders also look at your total available credit. i.e. "If I loan this person money and he then goes and maxes out all of his cards (which he is perfectly able and entitled to do), what are the chances of me getting my money back when he does and everyone else comes knocking for repayment".

kirstybum

I'm not looking at applying for anything else just want to be in a good position for mortgage in 2 years when the bloody default drops off

phona

This thread reads a bit like you'd already made up your mind to extend the overdraft as soon as someone made a positive comment...

You say the overdraft and phone contract are your only lines of credit: have you considered taking out a credit card? With a 4 year old default you should be able to get a subprime card.

Do you use your overdraft? Unlike using CCs, frequently being overdrawn makes it seem like you can't manage your money properly. Getting your current account back into the black is likely to be far more beneficial for your credit worthiness (and finances on the whole) than any fiddling around with limits.