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    • geek773
    • By geek773 24th Jul 19, 1:10 AM
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    geek773
    Overdraft stoozing with student account - bad idea for credit score?
    • #1
    • 24th Jul 19, 1:10 AM
    Overdraft stoozing with student account - bad idea for credit score? 24th Jul 19 at 1:10 AM
    Hey everybody!

    I'm 18 and, all being well on results day, I'm intending to be a uni student from September. I want to open a Nationwide FlexStudent account in August, which offers a 0% overdraft up to 1,000 in year one, increasing by 1k each year. I already have a 1.47% easy access savings account with AA Savings (and intend to open a top-rate equivalent account when that rate expires in a year).

    In theory, I could stooze the freely borrowed 1k from the student account (plus more in future years) into the savings account - that'd only be worth about 14 but it's free money and good practice, and it might be more worthwhile with the higher limit in year 3, especially if interest rates rise.

    However, I'm concerned about the impact of being deep in my first ever overdraft for the entire year on my credit report (currently good but almost entirely empty) - maybe they won't allow me to expand my overdraft limit in future years (it's not automatic), which could be a problem if I ever actually need to borrow the money. Maybe it could also affect my ability to get a good credit card during or just after uni, or even to get a mortgage in 10 years' time (although I'm thinking that's unlikely, since I intend to consistently use and pay off a credit card in the interim, once I have monthly income, which would be good for my score).

    Thoughts on whether this could be damaging, or even whether it's worthwhile? Should I maybe just try to get a credit card and stooze with that instead, or use it normally to balance out the effect of the overdraft stooze on my credit score?
    Last edited by geek773; 24-07-2019 at 1:13 AM.
Page 1
    • enthusiasticsaver
    • By enthusiasticsaver 24th Jul 19, 11:58 AM
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    • #2
    • 24th Jul 19, 11:58 AM
    • #2
    • 24th Jul 19, 11:58 AM
    Personally I would not do that at 18. Sensibly managed credit with a history of paying debts off in full on a monthly basis is what builds up a good credit history. Lenders won't see you have savings so will just think you have borrowed the maximum. The savings rates are so low that the returns are not worth it for stoozing in my view. Some will disagree though.

    Regular savers are what builds up savings with decent interest rates rather than juggling with borrowed money.
    Early retired in December 2017

    I'm a Board Guide on the Debt-Free Wannabe, Mortgages and Endowments, Banking and Budgeting boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Pease remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com
    • pinknsparkly
    • By pinknsparkly 24th Jul 19, 1:24 PM
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    • #3
    • 24th Jul 19, 1:24 PM
    • #3
    • 24th Jul 19, 1:24 PM
    Using an ARRANGED overdraft won't adversely affect your credit rating. Mis-managing your arranged overdraft and going into your unarranged overdraft will affect it.

    I would be very surprised if you couldn't extend your overdraft at the end of the year simply because you've been using it. In contrast, I would be much less surprised if they refused to extend an overdraft you've never used (on the basis that you don't need it!).

    Keep in mind that you can also open more than one student account, with more than one overdraft (usually, check the T&Cs to be sure).

    Since you talk about buying a house 10 years or so (i.e. not directly after graduating) it won't affect your credit rating at that point. And as for opening a "good" credit card - you're going to be more restricted as to what cards you can open by the fact that you're a student than the fact that you've got an overdraft. Being a student means you're likely to be offered quite a small limit (at least at first).

    For what it's worth, I opened every single student I could get my hands on for the 0% overdrafts and saved the money in high interest savings. I think I generally had at least 5 student accounts on the go for the 5 years I was a student (4 year undergraduate course and then an MSc), and it didn't adversely affect me in any way after graduating.

    You do, however, need to be VERY VERY VERY sure that you will manage the money appropriately, and won't simply end up with a large overdraft that you'll have to pay interest on when you graduate because you ended up spending all the money instead of saving it! If you think the money will be in any way tempting, then don't do it (especially given how low the interest rates are at the moment)
    MFW 2019 challenge #99: 8174 / 6,000 (4671 is in "offset" pot)
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    • geek773
    • By geek773 24th Jul 19, 5:28 PM
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    geek773
    • #4
    • 24th Jul 19, 5:28 PM
    • #4
    • 24th Jul 19, 5:28 PM
    Thanks both for the replies. Worth noting that I do also have a regular saver and will be filling that to its limit from my other savings as a priority, as its interest rate can't currently be beaten except with a fix or a current account that demands minimum monthly income. Also, I'm very sure I won't have any temptation problems with the borrowed money, as much as that's definitely a valid concern - I have a high student loan and am determined to live within those means, and I haven't so far been tempted by the savings my parents have transferred into my name for me to invest.

    Interesting to see the difference of opinion on the effect of fully using an arranged overdraft on a credit score/overdraft extension. Might see if Google reveals any expert consensus on that. Both answers certainly seem to make sense but can't both be right!

    I'll definitely look into the possibility of multiple student accounts, which might make this more worthwhile. I vaguely remember having read something about not being able to do that with the Nationwide one, but I'll have to dive into the T&Cs.

    Edit: As I suspected, Nationwide don't let you have another student account at the same time, which is disappointing (and maybe an anti-stoozing effort?).

    Edit2: Actually, they only say you can't already have a student account when you open it and Santander, among others, doesn't seem to have any such restriction. Might just open the Nationwide one first and give the multiple account thing a try, subject to talking about it in branch or on the phone.
    Last edited by geek773; 24-07-2019 at 11:16 PM.
    • Novice investor101
    • By Novice investor101 24th Jul 19, 5:55 PM
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    • #5
    • 24th Jul 19, 5:55 PM
    • #5
    • 24th Jul 19, 5:55 PM
    I did similar when I was a student - in 2004 to 2006. Interest rates were much higher then. I remember going into NatWest & asking if I could transfer my whole 2k interest free overdraft into my NatWest ISA & they said it was fine, so I did.

    I then spent a while working the odd overtime shift here & there at my weekend job until it was paid back, & then did it again.
    By the time I'd finished uni I'd managed to save about 7k from the overdraft & overtime & had no debts. Somehow, I was a lot more determined at paying odebt than accumulating savings so it worked for me.

    Nowadays I'm better at saving/investing & don't have any debt other than a mortgage & credit cards that get paid off in full each month.

    If you're disciplined, it can work.
    • Jami74
    • By Jami74 25th Jul 19, 11:52 PM
    • 359 Posts
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    • #6
    • 25th Jul 19, 11:52 PM
    • #6
    • 25th Jul 19, 11:52 PM
    I transferred as much as I could into my savings account and lived out of my student overdraft. It didn't make much money but it was pleasing to see a few free pence drop into the account every month. It was easy access and I had notifications set up on the student account so could transfer money back if I needed to.
    Mature student 2011-2016
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    • seatbeltnoob
    • By seatbeltnoob 6th Sep 19, 4:57 PM
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    seatbeltnoob
    • #7
    • 6th Sep 19, 4:57 PM
    • #7
    • 6th Sep 19, 4:57 PM
    I did this without realising when I was in uni. I put my overdraft money into ING direct, they were paying a whopping 5% on instant access!


    Well, I got several letters, 2 months apart, obviously sent from an automated system saying that overdraft is for occasional use and not designed as long term credit and asked me to return the money back to the account.



    Stoozing looks bad on credit reports. You max out cards at 90% paying off the minimum amounts each month. It looks like you are struggling with debt and someone living beyond their means. You might need credit to help you through student and graduate life, I suggest not doing this and get a part time job if you want to make some money on the side.


    beign a student you're going to be living on very low income, occasionally need to borrow money. Stoozing is for people who are generally averse to debt and dont have any need to borrow money from the bank for the foreseeable future.
    Last edited by seatbeltnoob; 06-09-2019 at 5:00 PM.
    • jeepjunkie
    • By jeepjunkie 7th Sep 19, 3:20 PM
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    • #8
    • 7th Sep 19, 3:20 PM
    • #8
    • 7th Sep 19, 3:20 PM
    Never given a crap about credit scores if stoozing nor has it impacted mortgages etc even paid off weeks prior to applications. Can't see much point if just starting out stoozing now as rates/offers are poor. Generally I find you really need good interest bearing current accounts feeding regular savers with profits going into pension for the tax relief uplift. At least that's how I work it. Really starts to lift off 30k+
    • jeepjunkie
    • By jeepjunkie 7th Sep 19, 3:22 PM
    • 1,678 Posts
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    jeepjunkie
    • #9
    • 7th Sep 19, 3:22 PM
    • #9
    • 7th Sep 19, 3:22 PM
    Nowadays I'm better at saving/investing & don't have any debt other than a mortgage & credit cards that get paid off in full each month.
    Originally posted by Novice investor101
    You pay off your mortgage in full each month
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