Views of lenders on non-utilised credit.

ForumUser7

Hi,

I’ve been approved for a small interest fee arranged overdraft.

I do not intend to dip into it, and rather it’ll cover an account fee that is immediately reimbursed into the account. Therefore, only 6% of the overdraft will be used each month, and it’ll be reimbursed within an hour of it being used.

Will not using the OD fully negatively impact my affordability, or would most lenders just be pleased that I don’t need to dip into it please?

Thank you

MorningcoffeeIV

It'd look better if you didn't need to dip into it at all, but try to keep it to a minimum.

But if you repay the same day, it shouldn't show up on your files.

PRAISETHESUN

The overdraft limit will be visible to lenders, and may impact some lender's affordability decisions. Using it and immediately repaying it however won't count as actually using it however - the bank's won't charge you for it and it'll get reported as 0% utilisation to your credit files.

ForumUser7

Thanks both - this is my first credit product, so it’s all new to me.

@MorningcoffeeIV I can fully avoid using it by putting in the funds for the account fee each month and then taking them back out again once reimbursed like I was before - should I continue doing that? Credit Karma said it was a good idea to utilise between 1% and 25% of my available credit, but I guess if I can use 0% it’s probably better seeing as the overdraft is a safety net and not really meant to be used each month. Maybe that guidance was more meant for credit cards. I suppose even if other providers don’t know if I used it if it wasn’t reported as it was reimbursed the same day, Lloyds would know and perhaps that would affect their internal scoring of me.

MorningcoffeeIV

ForumUser7 said:

Thanks both - this is my first credit product, so it’s all new to me.

@MorningcoffeeIV I can fully avoid using it by putting in the funds for the account fee each month and then taking them back out again once reimbursed like I was before - should I continue doing that? Credit Karma said it was a good idea to utilise between 1% and 25% of my available credit, but I guess if I can use 0% it’s probably better seeing as the overdraft is a safety net and not really meant to be used each month. Maybe that guidance was more meant for credit cards. I suppose even if other providers don’t know if I used it if it wasn’t reported as it was reimbursed the same day, Lloyds would know and perhaps that would affect their internal scoring of me.

That's pretty much it.

Other lenders won't see it but Lloyds may figure you can't quite get through the month without the OD.

Re credit utilisation- ignore what Credit Karma say. If you're using credit but clearing in full each month (eg credit cards), the utilisation doesn't matter. 

If you're not able to clear in full, then you need to be borrowing as little as possible.