Finances question: Keep larger overdraft availability or accept the banks cut?

[BiBabbles]

So, I've recently got an email that my arranged overdraft is going to be cut in half at the end of next month. I have the option to request it to remain the same. I'd like to hear other's ideas on this as I'm conflicted and am struggling to find relevant information.

We haven't used it at all since February, after getting stuck in it some years back (complicated mess of helping then-friends out and never getting paid back and then kept having issues). Paying it off and getting a month cushion this year that we've kept since then has been great.

At first I thought it was okay, if a bit weird when they were offering to more than double it a few months back (because of course, once you no longer need it, they want to sell you more of it). I'm not concerned we're going to need it in the near future though there is always that worry of something big - especially after everything we've dealt with financially and with how things are now.

There is also the issue that we're looking to buy a home within a next year and a lot of what I've seen says it looks better to have more credit available (though I guess if it's debt-to-income ratio and we have 0 debt then it doesn't matter maybe?). Would requesting the overdraft stay larger ping against us?

I know I'm overthinking this, but having finally gotten a real handle on finances after a some hard years, I'd like to figure out what's the safest course of action with our plans. I have until mid-next month to decide.

id accept the reduction as long as i had savings to cover anything unexpected that needs to be paid

This isn't a good way of borrowing money though. Do you not have a credit card in case a larger unexpected expense crops up? Having a credit card and paying it off within a month or if not possible straight away, then paying it off regularly decreasing the amount owed will build up your credit rating. You should also make sure you're on the electoral roll.

And yes, agree with pp, it's more sensible to reduce it and have rainy day savings instead, as well as a well managed credit card to build up your rating.

Take the reduction. It will improve your credit.

I've got a £500 next account, pay it off every month. This morning they offered me 10k. Having toom much credit also impacts your score.

As I said, I don't think we're going to need to borrow into the overdraft at any point soon. Our savings are fine - they're kept separate, we kept the overdraft as long as we did in part because we needed liquid cash for immigration and for helping to care for ill relatives, both of which are mostly resolved.

Our credit rating is good-excellent. My spouse is on the electoral roll, and I will be once I'm a British citizen (just a waiting game at this point) though I'm unlikely to be on the mortgage application (as our mortgage broker said, US citizenship does make banks wary with how the US government is treating international banks. Honestly, at this point I'm lucky my banks haven't closed my accounts as have happened to others I know).

It's just how will having a smaller overdraft look for a mortgage vs requesting to keep it larger. Most the mortgage advice out there is to not be in it for months beforehand and that a bigger debt-to-income ratio is better, so hearing how a smaller overdraft facility helps with credit score is good to hear.

Experian website answers your question.

www.experian.co.uk/consumer/guides/overdraft-credit-score.html#:~:text=An%20arranged%20overdraft%20is%20unlikely,could%20improve%20your%20credit%20rating.

Sorry, link didn't work, I suggest you Google this website and the article should come up.

I've read similar before - it doesn't really answer this question.

Like most resources on this, it mainly discusses people using an overdraft. We haven't used the overdraft in over 6 months, it's just still accessible. We remained within our limit during the time period prior. We currently have no debts beyond students loans and handled all previous debts well even if it took longer to be in a position where we felt comfortable using our savings to clear it out to a full month's cushion (partially because of this, fear of losing the arranged part while things were so chaotic. Things are far calmer now for us even with COVID and my spouse working in hospitality - we've had a few hell years).

Not asking to increase the limit, but in keeping the same limit (£2000) vs taking a smaller limit (£1000). Likely not going to make much difference really, I know I'm overthinking this, but as our mortgage application is already complicated with my status, anything that helps I'm open to considering.

I was wondering whether requesting to remain would involve a hard or soft search as part of that process, but as the link says, that's not consistent across banks and I don't know if it would even be applicable in this situation.

If a smaller overdraft facility we're not using improves a credit score and looks better comparatively, then that's great. We're not using it or feel any need for it now, I'm just nervous about doing anything that will make this process harder than it already is.