Credit rating and overdraft?

in Credit Cards
10 replies 81.3K views
Does having an overdraft affect my credit rating?

If so how and by what extent?


  • jon142jon142 Forumite
    277 Posts
    An overdraft is an agreed form of lending between you and a bank just as a loan, credit card etc is. an overdraft is usually repayable on demand from the bank and this is why they are easier to get ahold of than a credit card or loan.

    An overdraft should be used as a temporary type of borrowing, It's not something that you should live in day in day out. If you are always in your overdraft with the bank and not repaying it chances are you will have a poor internal score with the bank. They like to see money being paid in that pays bank the overdraft.

    The golden rule is an overdraft is the easiest and cheapest way of lending money short term. different lenders are looking for different things from there debtors.

    To sum up I would say being in an overdraft is OKAY if money is going in to pay it back. If not your living beyond your means which will show as debt stress to lenders.
  • Sorry perhaps i didnt explain myself properly. In order to improve my credit rating everything else being equal, should I concentrate on reducing my overdraft or reducing my credit card?
  • jon142jon142 Forumite
    277 Posts
    Overdraft first then credit card.
  • Paul_01Paul_01 Forumite
    392 Posts
    Ninth Anniversary 100 Posts Combo Breaker
    Likely to be cheaper to do it the other way round.

    There may be some advantage in terms of your internal credit score doing it o/d first, but not to your credit files.

    Personally, I'd pay off the more expensive borrowing first.
  • Cheers, not about the cost, need to get my credit file into the best shape i can asap.
  • YorkshireBoyYorkshireBoy Forumite
    31.5K Posts
    Part of the Furniture 10,000 Posts Name Dropper
    Paul_01 wrote: »
    There may be some advantage in terms of your internal credit score doing it o/d first, but not to your credit files.
    I couldn't disagree more! :)

    Prolonged overdraft use tells lenders, via your credit report, that you can't manage your money day-to-day/month-to-month.

    Whereas it's natural to have a credit card balance each and every month, being as it normally comes with up to 56 days interest free.

    Provided you're in authorised overdraft territory, and not with Halifax, Santander, et al who charge a daily fee instead of interest, the overdraft EAR isn't likely to be much more than the UK average credit card APR of 18.xx%.

    And don't forget, overdrafts can be called in, at best, with 60 days notice...and sometimes, literally, on demand. Yet another reason for concentrating on the overdraft first.
  • Paul_01Paul_01 Forumite
    392 Posts
    Ninth Anniversary 100 Posts Combo Breaker
    Minimal benefits - this one issue in isolation is going to make very little difference.
  • Just a side question on overdrafts affecting your ability to get credit etc.

    I have just realised that my bank account is not on my credit report with at least two of the credit reference agencies. All of my other borrowing, mortgage, cards, other bank account etc is on their and is correct.
    Just curious if anyone else has had this issue, and whether it is a problem?

    Just for information, I have been with said bank which is not on the report for 18 years, and the credit card with the same company is on my reports.

  • natscat84natscat84 Forumite
    115 Posts
    I have a student account with a 0% overdraft - so I take that money and stick it in my ISA to earn interest. My OD is near it's limit, but it doesn't seem to have given me any problems in getting credit for other things.

    Maybe student accounts are reported differently, but mine does appear on my Experian report
  • Experian_company_representativeExperian_company_representative Organisation Representatives - Private Messages may not be monitored
    2.1K Posts
    Part of the Furniture Combo Breaker
    Some banks only report overdraft facilities to the CRAs over a certain size eg £1000. If you ask the bank why yours is missing they should be able to tell you.

    James Jones
    Official Company Representative
    I am an official company representative of Experian. MSE has given permission for me to post in response to queries about the company, so that I can help solve issues. You can see my name on the companies with permission to post list. I am not allowed to tout for business at all. If you believe I am please report it to [email protected] This does NOT imply any form of approval of my company or its products by MSE"

    Posts by James Jones, Neil Stone, Stuart Storey & Joe Standen
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