Overdraft withdrawn, credit file implications

ACallaghan

Hi can somebody advise me on the implications on my credit score of bad overdraft management?

I've been over my overdraft limit three times in the last four months and my bank have reduced my overdraft by £1100 and given me a few weeks to pay the money in to sort it out. I spoke to them about reducing this amount in three installments, they are happy to do this but have said the arrangement will show on my credit file.

What should I do?

Ebe_Scrooge

I'm not sure quite what you're asking. You need to pay the money back as agreed. The arrangement to pay will be recorded on your credit file, which future lenders will be able to see. Whether, and how much, this impacts their decision to lend to you is down to their own internal policies - but it is a material fact, so there's not really anything you can do to change that.


If you're not anticipating applying for any more credit for the next 6 years ( this includes a mortgage ) then it will not actually affect you.


But you do need to make sure you pay your bank back as agreed - if you break the agreement, then they will be within their rights to start debt-recovery proceedings.

StopIt

Pay it ASAP.


Looks like you may hit with AP markers on your credit history, which stick around for 6 years and are a big red flag. Paying the OD off before they can put that marker up may be an idea but I'm not sure how quickly they'll hit your files.


Not having an overdraft facility is neither here or there credit wise however. However going over your OD will not look good to your current bank of course!

ACallaghan

I've got until June 5 to pay £1,000 into my account to reduce my overdraft, or reduce it in two installments via a payment plan/arrangement.

While I'm paying the two installments over two months my file will be marked as AP and this is bad. In fact it will affect my credit history for six years.

So I suppose what I'm asking is, should I avoid the repayment plan at all costs and try and find some way of getting hold of £1,000 by June 5, as this way my longer term credit history won't be shafted?

Arleen

Avoiding the repayment plan will be better for your credit file, but I imagine you already have some markers there for going over the OD. So you have to wage your credit file quality vs. whatever you have to do to repay it in time.

ACallaghan

So which is worse, going over an agreed overdraft or having the markers for being on a repayment plan?

Arleen

You already did go over your overdraft, can't have those removed so I am not sure what is your question anymore.

ACallaghan

OK I understand now. So really I'm just as well off entering into the payment agreement for two months then it's done and I move on and try and repair my credit history?

Arleen

ACallaghan wrote: »

OK I understand now. So really I'm just as well off entering into the payment agreement for two months then it's done and I move on and try and repair my credit history?

Pretty much. I feel that you would also benefit greatly by posting an SOA on debt free wannabe board, as steadily falling into your overdraft, and even over it, makes it look like you don't have a good grip on your finances.

GarthThomas

ACallaghan wrote: »

OK I understand now. So really I'm just as well off entering into the payment agreement for two months then it's done and I move on and try and repair my credit history?

No, I don't think so. You'll be adding an AP marker if you can't repay it straight away. You don't have it yet, and it's another negative mark if you do get it.

Of course, a payday loan could look even worse, so whether you should pay it off immediately depends on how you'd manage this.