Reduce Overdraft limit to improve score?

rtho782

I currently have two arranged overdrafts on Nationwide accounts, one for £5,000 on the joint account and one for £2,500 on my own.

We used to go in to them now and again, before nationwide started charging crazy levels of interest on them (39.9%), and now avoid it wherever we can, for a couple of years we've not been more than £100 into them at any time. We'd rather use other sources of borrowing if we have to for some reason.

The level of APR makes it unsuitable for even emergency borrowing, I'd put a new boiler on a credit card instead for example.

I'm well below 50% available credit utilisation, would I be better decreasing or eliminating these overdraft facilities, or just leaving them there unused?

[Deleted User]

There's no need to reduce. Just don't use them. At all. If however, you can't resist the urge to dip into them, then remove them.

There's also no need to try to improve your score, as it doesn't matter. Just manage your credit responsibly.

MalMonroe

Agree with zx81. Don't use the overdrafts at all. Your credit history will indicate that you are, or have been, overdrawn if you do. Lenders will be able to see that. The fact that you have overdrafts available, or how much they are, won't be recorded.

But if you take out loans or use credit cards as alternative methods of borrowing, that usage will also be recorded on your credit files. 

I have learned the extremely hard way that the only way to maintain a clean and healthy credit file is to not borrow at all, by any method. Even if it's 0% balance borrowing, it's still going to be recorded. Financial institutions know everything. 

In an ideal world, don't ever use the overdrafts and use credit cards only to buy items and then pay off the balance, in full (Martin tells us) every month. Leaving balances on credit cards indicates that you are unable to pay your debts. 

And also as zx81 says, credit scores don't matter because nobody else ever sees them. 

[Deleted User]

MalMonroe said:

Agree with zx81. Don't use the overdrafts at all. Your credit history will indicate that you are, or have been, overdrawn if you do. Lenders will be able to see that. The fact that you have overdrafts available, or how much they are, won't be recorded.

But if you take out loans or use credit cards as alternative methods of borrowing, that usage will also be recorded on your credit files. 

I have learned the extremely hard way that the only way to maintain a clean and healthy credit file is to not borrow at all, by any method. Even if it's 0% balance borrowing, it's still going to be recorded. Financial institutions know everything. 

In an ideal world, don't ever use the overdrafts and use credit cards only to buy items and then pay off the balance, in full (Martin tells us) every month. Leaving balances on credit cards indicates that you are unable to pay your debts. 

And also as zx81 says, credit scores don't matter because nobody else ever sees them. 

That's not completely accurate, cards with a 0% promotional rate are often recorded as that and provided you pay off minimum (ideally minimum +£1 or more) each month, it's not a problem. I have a fair chunk of debt on 0% as I like having to pay no interest and have the money in savings (some long term, some short) rather than the bank having the money. I have had no problem getting credit, indeed, I just successfully got the Santander BT card with 0% fee and £30 Amazon voucher which will allow me to split up some of the existing BT debt so I can reduce the outgoings a touch and have more cash spare.

Ebe_Scrooge

MalMonroe said:

I have learned the extremely hard way that the only way to maintain a clean and healthy credit file is to not borrow at all, by any method.

This is actually incorrect.  Regular use of a credit card, and ALWAYS repaying IN FULL every month is probably the simplest way to build/maintain a healthy credit history.  A "thin" file (i.e., one with very little evidence of responsible credit usage) can be almost as bad as a "bad" history.  By using a credit card "correctly", you are borrowing and repaying every month, which is what a lender likes to see.

But all the other points are very valid.  Using an overdraft (especially regularly) is always viewed negatively, carrying a balance on a credit card (unless it's on a 0% promotion) is viewed negatively, and the score you see on your CRA report is utterly meaningless.

rtho782

FWIW we rarely if ever use our overdrafts, when we do it's generally by less than £100 and for a couple of days before payday, and not every month.

Credit file shows the amount of the overdraft, only seems to show if we use it if we happen to be in it when the update happens, which we haven't been in a few years.

I was more concerned that it meant we had £7,500 of available credit we were not using.