Student Account overdraft->savings - Will this affect your credit rating?

Hi all,

So I've heard about people taking their 0% interest overdrafts, and depositing it in a quick access savings account. This sounds like a great way to work the system, but I've read mixed information on one question from this forum and the internet in general:

Will keeping your student account in the red permanently affect your credit rating?

Some have said it'll benefit it, due to you appearing to constantly be in credit and handling it, while others have said that it'll look like you're financially insecure. So I'm really quite unsure :tongue:

Cheers in advance,
JB :biggrin:

Reply 1

elldeegee

With the student account overdraft, most banks have a "condition" whereby you need to deposit so-and-so amount every so often.
For example, Natwest have said that i need to deposit £750 every 3 months.

If these conditions aren't met then they are likely to close off your account. (by this i assumed close = change from student to current account) I've recieved letters and then paid the money and they've not done anything, but some banks may expect you to do it without reminders and instantly close your account.

Some people are safe from this because of the fact that they use it for their Student Finance to be paid into, and so this money automatically gets paid in.

I was always under the assumption that if the student account gets changed from a student account to a current account then anything in the overdraft needs to be paid otherwise it will start affecting your crredit rating.

Reply 2

Juanitor

Original post by elldeegee

Fair enough, I've heard of such account conditions. I meant to ask whether constantly running on overdraft, within your account's limit, would be 'reported' to anyone, as long as you followed the rules and conditions. Does it vary from bank to bank? I'd rather not have a marred 'rating' of some kind just because I used my overdraft to generate some savings interest. And ... I'd rather not ask banks whether living off overdraft is possible; it sounds like the kind of thing that wouldn't help their confidence in me :tongue:

(edited 11 years ago)

Reply 3

TobeTheHero

how do you make money off your overdraft anyways?

Reply 4

Juanitor

Apparently some people take their overdraft minus 20 quid, and put it all in a high-interest savings account.

Reply 5

DarkWhite

Nothing wrong with it really.

Credit ratings aren't universal, but your credit report is. Your credit report will show both your overdraft limit and how much of it you've used, and it should be automatically updated regularly (monthly/quarterly).

However, how a potential lender views this is another thing. One creditor may like to see a bill being paid off in full or not used at all every month to see that somebody's reliable; whilst another will want to see money being used but not paid off in full, because interest is how creditors make money!

I would imagine that most lenders wouldn't bat an eyelid at your overdraft, because they'll know it's a student overdraft and that it was 0% interest.

Just, as has been said, be careful of any account requirements on student accounts like minimum deposits or transactions. Also read the Ts&Cs to make sure that having that student account/overdraft doesn't conflict with another account (e.g. if you already have a student account, you normally can't open another with another bank!)

Reply 6

ThePants999

Your credit rating is about how well you've stuck to repayment terms. Your rating goes down if you don't make a repayment that you signed up for. An overdraft is not required to be paid off at any particular time, and staying in the red will not generally adversely affect your credit rating. The bank is entitled to call in the overdraft at any time, and your credit record would be affected if you didn't repay it on request, but in practice they don't do that!

Reply 7

pinkangelgirl

its your overdraft, and as long as your sticking to your rules and conditions of the account then you can use it how you will. Especially 3rd year when im some accounts you can get a massive overdraft!