Overdraft Credit Score

Hello,

Say I have a debit card and I go £1000 in overdraft (within my arranged overdraft) at 0% interest, meaning I don’t have to pay it back. If I constantly stay in an overdraft will that negatively impact my credit score? I think it shouldn’t because it’s my debit card and I don’t need to pay it back cuz of 0% interest. Furthermore, it is within my arranged overdraft.

Just want to make sure!

Thanks

Reply 1

martin7

20

Original post by HxTrinity

Hello,

Say I have a debit card and I go £1000 in overdraft (within my arranged overdraft) at 0% interest, meaning I don’t have to pay it back. If I constantly stay in an overdraft will that negatively impact my credit score? I think it shouldn’t because it’s my debit card and I don’t need to pay it back cuz of 0% interest. Furthermore, it is within my arranged overdraft.

Just want to make sure!

Thanks

You always have to pay back an overdraft. An overdraft is a way of borrowing money temporarily. The bank will want it back -- and it's very likely that your account's terms and conditions will state that an overdraft is repayable on demand.

If you make use of your overdraft facility then it will have an impact on your credit score. A lender will make decisions based on the way you use your overdraft. If the amount you borrow decreases over time then that's going to look positive; if it increases over time, it will look negative. If you're borrowing a significant proportion of your limit it will look worse than if you're using only a small proportion.

The overdraft being at 0% doesn't mean you don't have to pay the money back -- it just means that the bank isn't charging you to borrow the money.

Reply 2

hotpud

18

Original post by HxTrinity

Hello,

Say I have a debit card and I go £1000 in overdraft (within my arranged overdraft) at 0% interest, meaning I don’t have to pay it back. If I constantly stay in an overdraft will that negatively impact my credit score? I think it shouldn’t because it’s my debit card and I don’t need to pay it back cuz of 0% interest. Furthermore, it is within my arranged overdraft.

Just want to make sure!

Thanks

0% doesn't mean you don't have to pay it back. It means you won't be charged to borrow that money. For most student / graduate bank accounts, that 0% limit only lasts for 6-12 months and then is either reduced to say £500 or stopped all together. In other words, you need to pay it back pronto. It is unlikely to affect your score too badly.

One way to improve your credit card score it to get yourself a credit card, buy some shopping on it and pay it off straight away.

Good luck!

Reply 3

HxTrinity

OP

12

Original post by hotpud

0% doesn't mean you don't have to pay it back. It means you won't be charged to borrow that money. For most student / graduate bank accounts, that 0% limit only lasts for 6-12 months and then is either reduced to say £500 or stopped all together. In other words, you need to pay it back pronto. It is unlikely to affect your score too badly.

One way to improve your credit card score it to get yourself a credit card, buy some shopping on it and pay it off straight away.

Good luck!

Thanks for this! I have a student credit card and am paying it back with direct debit (full amount every time to build up credit score). How long do I have to pay it back, will I be notified or no? I am with HSBC

(edited 2 months ago)

Reply 4

hotpud

18

Original post by HxTrinity

Thanks for this! I have a student credit card and am paying it back with direct debit (full amount every time to build up credit score). How long do I have to pay it back, will I be notified or no? I am with HSBC

How long is a piece of string. In theory you gave something like 58 days but they will always find a way to get you. If you pay it off before the end of the month, there is nothing to worry about. Probably best read the Ts and Cs or go to the HSBC website for details. Next time you get any financial product or card, always start here:

https://www.moneysavingexpert.com/

Reply 5

martin7

20

Original post by HxTrinity

Thanks for this! I have a student credit card and am paying it back with direct debit (full amount every time to build up credit score). How long do I have to pay it back, will I be notified or no? I am with HSBC

If, by "How long do I have to pay it back" you mean pay back your overdraft, then:

A student account normally comes with an overdraft facility. The limit tends to increase over the duration of your course. When you graduate, most banks convert your student account into a graduate account, and reduce the limit over the next year or two, with the expectation that you'll be getting a job and be in a position to start reducing your borrowing and then pay the overdraft off.

It's fairly safe to say, I think, that provided you comply with the terms and conditions of your account, your student overdraft facility will stay in place. You'll need to check what happens to your account when you graduate, so you're in a position to pay off the overdraft while it's still interest-free. Banks typically charge 35-40% interest on overdrafts, so you really want to avoid having to pay!

Overdraft Credit Score

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