Should i reduce my overdraft?

Dowsett

Hi,

Im after a bit of advice on how my credit file might be effected / viewed by lenders.

Ive had a £1000 OD with Halifax for, well about 8 years. I took the decision to reduce it a bit every month. It now stands at £400. I am out of the red and in the black. This is the first time ive been in the black for a whole month

I was going to reduce the figure to £300 / £250 as i still want a safety net but dont want the temptation or misfortune of dipping in to it that deep again.

I had a loan with them a few years back - never missed payment and is all paid up. I (we) have a mortgage with Halifax.

I am a bit worried that reducing my OD has done a bit of harm to my credit rating.

I would really like to be able to get some of halifax's credit cards as they have good deals but always seem to get rejected (applied 2 or 3 times, spaced apart and all rejected).

So, im wondering, will reducing my overdraft even though its helped me a lot, effect my credit file that much? im not even sure if lenders can see that on my file?

TIA

Ebe_Scrooge

When you say you had a £1000 overdraft, do you mean you had £1000 available, or you were £1000 overdrawn ?


Generally, having the overdraft available but not using it is viewed as a good thing - it shows potential new lenders that other lenders are prepared to lend you money.


However, reducing the available overdraft wouldn't negatively affect your credit-worthiness to a huge extent - maybe just a little bit.


I suspect the main reason why you've been declined for credit is this : "I am out of the red and in the black. This is the first time ive been in the black for a whole month". If you've been in debt for some time, lenders may be reluctant to advance you further credit. Logically, if you appear to be struggling to meet your existing debt repayments, then more debt will only make things worse.


The best thing to do is apply for one of the sub-prime cards, use it for everyday purchases and pay it off in full every month religiously. After 6/8 months or so of doing this, you should find you're in a better position to apply for one of the more mainstream cards, as you'll then have a history of responsible borrowing and repayment.

Dowsett

No i wasnt over drawn. Ive been acting within my £1000 limit.

Id last to about 1/2 - 3/4 of the month and then go in to my overdraft.

I have a barclay card that i use. Its a long term low rate card that ive had for awhile. Also have utility bills in my name and phone contract. I will admit i am in debt but am not missing any payments or incuring any charges etc. Im acting within my credit limits.

phillw

Dowsett wrote: »

im not even sure if lenders can see that on my file?

Overdraft limits show up on your credit file. They will know what your limit was every month for the last five years as well as whether you were overdrawn.

Why do you want a credit card? You've just said that decreasing your overdraft from £1000 to £400 has helped you and you want to decrease it further. You're essentially admitting that you can't control your spending and you need the bank to prevent you from spending more than you have. A credit card is the opposite of what you need, especially one with a long 0% period.

More important is to stop going overdrawn or at least make sure it's not costing you anything (first direct and nationwide have accounts with 0% overdrafts).

Then if you must have a credit card then an aqua card with a low limit is likely your best option.

Dowsett

phillw wrote: »

Overdraft limits show up on your credit file. They will know what your limit was every month for the last five years as well as whether you were overdrawn.

Why do you want a credit card? You've just said that decreasing your overdraft from £1000 to £400 has helped you and you want to decrease it further. You're essentially admitting that you can't control your spending and you need the bank to prevent you from spending more than you have. A credit card is the opposite of what you need, especially one with a long 0% period.

More important is to stop going overdrawn or at least make sure it's not costing you anything (first direct and nationwide have accounts with 0% overdrafts).

Then if you must have a credit card then an aqua card with a low limit is likely your best option.

It seems a lot of people get flamed on here for asking questions that will help them....

Thanks, i didnt know lenders could see it or not.

If you must know i would LIKE another credit card for the 0% balance atm so i can shift some debt to that which will enable me to pay of existing card.

I had an over draft since opening the account however many years ago. I lost my job and ended up living out of it. If i do lose my job again (Not likely in the near future) its less hassle to get out of an easier to manage.

Now i want to concentrate on clearing my credit card and making my credit file 'good' as apposed to average.

phillw

Dowsett wrote: »

If you must know i would LIKE another credit card for the 0% balance atm so i can shift some debt to that which will enable me to pay of existing card.

I know it feels unfair but 0% deals are designed to tempt people with good credit ratings into debt, not to get people with bad credit ratings out out of debt. If everyone with bad credit could transfer to a 0% card then none of the lenders would make any money and as lending it costs them money they wouldn't survive.

You might be able to get an aqua 0% on spending for six months, which might allow you to pay off some of your other debt quicker. But unless you can clear all the debt in six months then you'll be back at square one again. In any case you should use the MSE eligibility check to see what chance is that you will get it, because the credit card companies can also see when another company declines you.

http://www.moneysavingexpert.com/credit-cards/best-0-credit-cards#poorcredit

Depending on what cards you already have then the credit card shuffle may work better for you. http://www.moneysavingexpert.com/credit-cards/cut-credit-card-interest I suspect it works better if they think someone else will offer you a balance transfer credit card.

I wasn't flaming you. If you've tried and failed all the things I suggested already then reducing your overdraft won't make any difference.

Thrugelmir

Dowsett wrote: »

I am a bit worried that reducing my OD has done a bit of harm to my credit rating.

Being in debt is negative. There are no positives.

Ive had a £1000 OD with Halifax for, well about 8 years.

I have a barclay card that i use. Its a long term low rate card that ive had for awhile.

What lenders will see is the fact you haven't been out of debt for a very long time. If you were to lose your job again you would be under financial stress. Wouldn't be responsible of a lender to advance you further lines of credit.

Onus is on you to tackle your own problems. Reduce your expenditure in any way you can. Not saying it's easy. But a sure of educating oneself.

phillw

Thrugelmir wrote: »

Reduce your expenditure in any way you can. Not saying it's easy. But a sure of educating oneself.

I find it fun to challenge myself to save money.

http://www.moneysavingexpert.com/family/money-help

I probably bore everyone to death when I'm out though.

Candyapple

OP why do you choose to ignore advice and continuously post the same thread with a slightly different variation over and over again?

You were given reasons as to why you are probably being declined in your thread here:
https://forums.moneysavingexpert.com/discussion/5354680

Your tiny overdraft is not the problem here. The £12k of debt you have is.