Overdrafts

thevoid69

Hi,
I have my own 'overdraft' where I keep £1000 in my current account at all times and forget about it, in case of an unexpected bill and for peace of mind.
However, I've been thinking that could be earning interest with my savings so it could be worth getting an overdraft for £1000 on my current account, not that I would ever use it.

I know applying for an overdraft would involve a soft search, but I presume if I proceed, it would be a hard search and effect my credit rating?

My credit rating is very high at the moment so I don't want to damage it, but unsure of the best way to go about what I'm needing. 

Thanks

grumpy_codger

Firstly, nobody sees your 'high score' except you. Lenders see your credit files, not the 'score'.

Secondly, what's the point in having it if you don't want to apply for credit? Overdraft is credit.

And, finally, one search isn't a big deal and has a very short-lasting minor effect.

PRAISETHESUN

The whole point of having a good credit file is to be able to apply for credit when you want/need it. A single hard credit search in an otherwise well managed credit file is nothing to worry about. It's effect will diminish in a few months.

And as an aside, you should be focusing on the actual data in your credit files, not the score/rating the CRAs provide. These are not seen by lenders, only the data is. As long as your data is good - all accounts accurately reported, payments made on time, etc - then you are okay.

flaneurs_lobster

You could have £1000 in an easy access savings account earning 4.5-5% which can be transferred to your current account pretty much instantly.

No need for an overdraft.

Who is your current account with?

Your credit rating is of no matter, don't worry about the made-up number.

thevoid69

I would prefer a buffer in my account though in case something comes out unexpectedly. 

flaneurs_lobster

thevoid69 said:

I would prefer a buffer in my account though in case something comes out unexpectedly. 

My method is to run my current account so that "unexpected" debits don't happen.

Anything unexpectedly debiting my CA is likely to be an error or fraudulent. I wouldn't want an overdraft facilitating withdrawals that I wasn't expecting. 

I run my main current account with a "resting" balance of ~£100. In the course of a month around £10k will move through it, peaks around month-start at about £7k.

All day-to-day spend is on cashback credit cards.

ColdIron

Get a credit card, no point in protecting a fictitious number that only you see

jimjames

thevoid69 said:

I would prefer a buffer in my account though in case something comes out unexpectedly. 

Depending on the bank (and all of mine do this so should be universal) they will pay any bills and generally SMS you to let you know that if you pay money in by a set time (around 2pm) then you won't incur any overdraft fees. I don't have an arranged overdraft.

I keep a balance close to zero in my current account and when bills come in I just move money from savings to cover the amount and bring it back to zero again. Means you can maximise the interest but you do need to be on the ball and transfer money that day. I tend to log in to check my account every morning but appreciate not everyone can do that.

MEM62

thevoid69 said:

I would prefer a buffer in my account though in case something comes out unexpectedly. 

That is not going to happen with any well managed account.  

Altior

thevoid69 said:

Hi,
I have my own 'overdraft' where I keep £1000 in my current account at all times and forget about it, in case of an unexpected bill and for peace of mind.
However, I've been thinking that could be earning interest with my savings so it could be worth getting an overdraft for £1000 on my current account, not that I would ever use it.

I know applying for an overdraft would involve a soft search, but I presume if I proceed, it would be a hard search and effect my credit rating?

My credit rating is very high at the moment so I don't want to damage it, but unsure of the best way to go about what I'm needing. 

Thanks

An overdraft usually carries fees, so probably not a lot would change, you'd still maintain a buffer to prevent going into overdraft.

Any application for credit results in a hard search marker. In of itself, will have a negligible impact on your credit file.

There is a very appealing solution potentially, if you qualify. Currently Nationwide are offering £175 switch bonus, plus 5% on current account balances up to £1500 for a year, plus a bit of cashback on spending. You could then also open their regular saver which is effectively easy access, and potentially qualify for the fairer share payment next time around.  

You'd need to fulfil the switching bonus criteria to get the £175, which are not onerous. 

friolento

Altior said:

thevoid69 said:

Hi,
I have my own 'overdraft' where I keep £1000 in my current account at all times and forget about it, in case of an unexpected bill and for peace of mind.
However, I've been thinking that could be earning interest with my savings so it could be worth getting an overdraft for £1000 on my current account, not that I would ever use it.

I know applying for an overdraft would involve a soft search, but I presume if I proceed, it would be a hard search and effect my credit rating?

My credit rating is very high at the moment so I don't want to damage it, but unsure of the best way to go about what I'm needing. 

Thanks

An overdraft usually carries fees, so probably not a lot would change, you'd still maintain a buffer to prevent going into overdraft.

 

I have a large-ish overdraft, £5K, on one of my current accounts. It often gets used for a few hours on the first of every month, for numerous SOs. It always gets settled on the day, before any charges incur, so I never pay any fees.

If I wasn’t in a position to pay my bills without borrowing, it would only use overdrafts as a last resort since they are one of the most expensive of credit facilities. Loans or credit cards (especially of the 0% variety) would be my preference for budgeting accordingly.