Point to reducing Overdraft limit?

RoboCod

RoboCod

RoboCod

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Hi,

perhaps a noddy Q but is there any point to reducing the limit of an overdraft?

Would it be beneficial to reduce the limit or in fact could it be harmful to my credit rating? :confused: Assuming of course that I would not be tempted to use the overdraft for anything more than an emergency (but I have two credit cards for that anyway)

Thanks

CP
 
I think it's mostly temptation - there are people out there that will buy something just because they can, and have the funds to do so. I don't see any point in reducing my overdraft (since it's a student account with no interest) but normally going into an overdraft can turn out to be very expensive if not paid off quickly.
 
Ok so as far as I can gather there would be no difference or merit to either reducing it or just leaving it as is other than the temptation factor if I keep it. Had it years so that isn't likely :)
 
Unless it's ridiculously huge just keep it as it is. There's no guarantee that if you actually needed it the bank would let you have it again. If you're not using it it won't make any realy difference to your credit rating (again, unless it's huge).
 
grimm said:
Unless it's ridiculously huge just keep it as it is. There's no guarantee that if you actually needed it the bank would let you have it again. If you're not using it it won't make any realy difference to your credit rating (again, unless it's huge).
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£2k and £2.5k so not huge. I wish I earned enough for the bank to happily offer me huge amounts of cash when I wanted :D
 
I'm not 100% sure on this, but I thought an overdraft classed as unsecured debt, even if you dont use it? So it could mean if you want to apply for credit they may take it into acount when credit scoring you. For instance if you had a 5 grand overdraft you didnt normally use, you still have the potential to be 5 grand in debt (along with the associated charges) and any lender would need to consider that in terms of completing an affordability assessment on you.

I am pretty certain they wanted to know what my overdraft and credit limits on credit cards were when we applied for our mortgage.

I'm probably completely wrong though! Hopefully someone will drop in and clarify either way :)

Cheers

Buff
 
BuffetSlayer said:
I'm not 100% sure on this, but I thought an overdraft classed as unsecured debt, even if you dont use it? So it could mean if you want to apply for credit they may take it into acount when credit scoring you. For instance if you had a 5 grand overdraft you didnt normally use, you still have the potential to be 5 grand in debt (along with the associated charges) and any lender would need to consider that in terms of completing an affordability assessment on you.

I am pretty certain they wanted to know what my overdraft and credit limits on credit cards were when we applied for our mortgage.

I'm probably completely wrong though! Hopefully someone will drop in and clarify either way :)

Cheers

Buff
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You are correct. To a point. It shows on your credit file as a facility. How any lender uses that information is up to them, but yes it shows on credit file.
 
I requested mine was reduced a little while back and the bank manager did everything to talk me out of it, eventually he said it looked bad on the system (bad for who, him or me, I'm not sure) and it may mean the facility is unavailable later if I needed it again.

Also, my overdraft is not showing on my credit file when it's not being used - it only showed it's total value and it's current usage when I actually used it (which has not been for a while)
 
I had a chat with my bank manage about this, a large overdraft will affect how much you can borrow, the bank see it as a way you can take out money and not having to pay back, as opposed to a credit card where there is a hefty interest rate in comparison.

By all means have an overdraft if you need to, but keep it reasonable.
 
I used to have a 3k one, now its a grand.

People are right though, when I was younger I would just dip in and use it for no other reason than it was there.
 
Been looking at this as I've been paying attention to my credit rating right now and having a large over draught facility seems to be a positive thing when its not being used.
It shows as being positive as lenders (ie the bank) are prepared to lend you money.
 
As above if it's not used then it shouldn't have any negative effect on your rating overall. If you have vast amounts of unused credit this in theory could be viewed negatively by lenders, but even now when the banks are being particularly picky about who they lend to I've never had an issue despite having what is probably about the equivalent of about 1 years salary available to me via credit should I be stupid enough (which reminds me, I've a card to close!).
 
peige said:
Been looking at this as I've been paying attention to my credit rating right now and having a large over draught facility seems to be a positive thing when its not being used.
It shows as being positive as lenders (ie the bank) are prepared to lend you money.
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This is what I thought.

I personally have a professional trainee loan which was for my law course, I then had two student bank accounts with £1.5k overdraft limits on each of them and still have them today but I'm in the black on both accounts.

I would have thought for a bank running a credit check, if they looked at my accounts and saw I was managing my loan properly and that I'm not and haven't been in the red on an account since I was a student then that would bode well in my favour if it came to requesting a loan etc.
 
I have a £1000 limit but rarely use it, I just keep it though because there's no negative to having it available and if I quickly need money such as to repair my car I can use it and not have the stupid charges of using an unarranged overdraft.
 
PapaLazaru said:
I never use mine but it is at £5k. I have not seen the need to reduce it myself. It does not go against you on a credit rating either.
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It can do as there is a section on your credit report for "available credit". You could be declined a loan for example if they think you might be a credit risk if you suddenly decide to use all of your available credit.

I think at one point I had nearly 100k available credit - I'd have been in serious **** if I'd have drawn on all of it!
 
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