Lowering Credit Rating - Overdraft

Rexyphil

Hi - I am using this year to attack my debt and improve my credit rating, ready to get a mortgage in a couple of years. The first thing I am working towards is clearing my overdraft (Was £2000). I lowered my limit to £1500 this month, and this has actually made my credit limit worse. What am I doing wrong? Thanks all!

molerat

Any change, good or bad, generally negatively affects your credit score. One of the reasons to totally ignore it.

By reducing the limit does that mean you are using a higher % of it ?

Rexyphil

No, I was pretty much maxing it out by the end of the month before I lowered it - one of the reasons why I wanted to start with lowering it. I'm going to get it to a limit of £300 (so I don't get charged anymore) and then switch to paying off my credit card I think.

Rexyphil

Thank you for the reply by the way!

Superscrooge

An explanation I have seen regarding why credit scores react negatively to change is -

The credit reference agency records your overdraft limit has been lowered. But won't know whether you or the bank made the decision to lower it.

If the bank had made the decision. It suggests the bank now regards you as 'more risky'. Hence your credit score falls. But this is usually just a temporary fall.

Don't get obsessed with your score. Concentrate on keeping your accounts in order and ensuring your credit history is accurate