Overdraft - good or bad?

tygar2 · 23 April 2018 at 12:29PM

Hello All,

I am trying to improve my credit file after some financial trouble in the past. All adverse information (defaults) has fallen off my file and I learned my lessons from the experience.

For the last 6 years, I have had one credit card with a £1300 limit. This is used and paid off in full every month without fail. I used it as a sort of credit builder. I am on the electoral roll and have a new 4-month-old joint mortgage. Besides the mortgage, I have no other debt.

I am signed up to Clear score, Totally Money, Noddle and MSE Credit Club. The general feedback seems to be along the lines of that I increase the amount of credit I have. I know their credit scores are meaningless - it's my file I am looking to get into top shape. I am looking into switching to First Direct for the cashback and have been asked if I want an overdraft - is this a good idea? I do not have any plans to use it - will only take it if it improves my credit file. Is applying for a new credit card or increased limit on my existing one better? Have read mixed things on overdrafts so a bit confused.

All advice is appreciated

Thanks

[Deleted User] · 23 April 2018 at 12:31PM

Having an overdraft but not using it, shows you are trusted and not desperate.

I'd also have a minimum of two or three cards.

binaryuniverse · 23 April 2018 at 12:33PM

It's definitely worth having the FD overdraft. For a start it's interest free on the first £250. Even if you don't ever plan on using it (but you never know), it's a useful buffer to have, for an emergency.

And yes, having the overdraft on your file, and demonstrating you don't need it will help improve your look to potential creditors.

tygar2 · 23 April 2018 at 12:55PM

Thanks for your responses, the buffer bit sounds good especially at 0% - will go for it after the account is open.

Should I also get a new credit card or should I wait a few months? Was eyeing the Halifax Clarity for travel abroad. I use a Monzo debit card for that at the moment.

Are your responses as to it being a positive based on any documents/ guidance I can access or is it more of shared knowledge and experience?

[Deleted User] · 23 April 2018 at 12:57PM

In my case, it's lender experience.

But most of it is common sense, in terms of how you would assess someone who asked to borrow money from you.

Overdraft - good or bad?

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