Will closing my overdraft account (zero balance) before mortgage application be an issue?

AndyDufresne

I have a £1000 arranged overdraft with HSBC. I want to apply for a mortgage in about 4-5 months. 

If I were to close this overdraft bank account, the only credit I would have would be a £500 credit card.

Would closing my overdraft harm my chances for my mortgage application? I don't use the overdraft, and haven't done for about 8 months, so I want to close it.

Thrugelmir

You have a bank account. An overdraft facility is only reported if utilised.  Closing the account won't register. 

AndyDufresne

Thrugelmir said:

You have a bank account. An overdraft facility is only reported if utilised.  Closing the account won't register. 

How come on my credit report a bank account with no arranged overdraft appears under "closed accounts"? My credit report states £1000 arranged overdraft on my bank account, so surely it will vanish if I close the account?

Will it harm my mortgage application?

simon_or

It won't harm or help your mortgage application. However, what can harm your application is a direct debit bouncing because you no longer have an arranged OD on your current account.

And you are right, on your credit report, the overdraft available does show whether you use it or not, just like the credit-limit on a credit card.

AndyDufresne

simon_or said:

It won't harm or help your mortgage application. However, what can harm your application is a direct debit bouncing because you no longer have an arranged OD on your current account.

And you are right, on your credit report, the overdraft available does show whether you use it or not, just like the credit-limit on a credit card.

Ok that's good to hear. If I closed my credit card as well, would this also have no affect?

Would having zero credit be an issue even if I still have credit history with previous credit access?

K_S

@AndyDufresne I can't speak for your specific case but generally speaking, based on my experience -

Only a few weeks ago, I did a 95% mainstream app for a couple whose credit reports were the shortest I've ever seen with Checkmyfile 'credit scores' between 600-700. One current account each and a couple of utilities, that's it. They had no problem at all because of that. Similarly, when I used to work in London I had plenty of clients with limited UK residence (many of whom couldn't even register on the electoral roll because of their nationality) and very bare-bones credit reports (mostly just current accounts) but again never had an issue placing them just because of that.