Bank wants overdraft repaying - why?

[SameDayNewName]

I know that they are perfectly entitled to ask for it to be repaid at any time. But it seems odd, as I've had it for years with no fuss. I called the bank, and the guy the other end, said that he didn't know the specifics, but often it was due to having a poor credit rating.

I've never checked my credit rating before, but just looked on "Clearscore" and it's 700 out of 1000, which is apparently good. The report doesn't show any issues or anything worrying.

So as not to drip feed, it's the Co-op bank, with an £1,000 overdraft. I do max it out every month.

So why does the bank suddenly want it back? Is it something I've done or not done? Or are banks less willing to lend? Or is it something else?

It could be as simple as their appetite for lending has decreased, not that you've done or not done something.

Your using a large OD every month to the max, that's seen as financial difficulty, therefore you need to repay it and they will remove your facility.

ask for a reducing overdraft by £50 a month

They will see it as you are never repaying it and therefore in financial difficulty. They should allow you to reduce it by a set amount each month.

Also, 700 isn’t that great of a score. Me & DH are both slightly above that now, with old bad debt and missed payments still on our file from 3-4 years ago.

700 out of 1000 is terrible I’m afraid. Do you know what causing it? Do you miss payments?

you really want 900 + to be considered good

Thanks - this is what they are doing, which is manageable. Obviously inconvenient though! I'm more just interested rather than anything else.

I'm absolutely new at credit ratings, but it says, and I quote, that I'm "Doing well". Apparently the UK average is 585, and my area is 615, so on that basis, it doesn't seem too bad?

It doesn't list any missed payments / unsecured loans / "hard credit searches" (whatever those are...). The only thing it suggests, is that I get a credit card. Tbf, I've never had one.

You’d be better off with a credit card than an overdraft.

It’s classed as “persistent debt” if you’re always in it. We had the same issue with Halifax. We actually rang them and spoke to them and explained we do have enough in our other accounts to just pay it off, and we don’t have a mortgage (own outright) but we just use that particular account for everything going in and out of. They accepted that and put a note on our file and it’s been allowed to just continue. (I know other people will find that set up weird but it just works for us).

700 on clearscore IS good. It may not be on other credit checkers but it’s well above the UK average.

I've always been a bit intimated with them tbh, was told by everyone not to get one, when I was growing up. Aren't they more expensive than an overdraft? Or was that just a 90s thing? Thanks.

Oh my Christ don’t get a credit card.

Clear the overdraft £50 a month and then sort out your money life. You need a budget and an emergency fund, NOT a credit card.

Trust me. And read Dave Ramsey’s total money makeover.

Exactly. Depending on average monthly spend, the OP could get the same £1,000 debt by using their credit card, running up a £1k balance each month, pay it off the next month before the due date, rinse and repeat. No interest, so saving whatever the bank is charging in overdraft interest.

Overdrafts aren't meant to be permanent. They're meant to cover temporary cash flow "blips" so the balance "should" fluctuate month by month, with some months hardly needed at all. That's why the bank are taking action as it will have flagged up that an overdraft is wrongly being used as long term debt.

It's probably why the credit score isn't particularly good.

Pay it off, use a credit card instead, pay off the credit card every month and the credit score will improve.

Barclay have just reduced my access to an overdraft, reducing the amount available.

I've never used it, no debts at all, full time working.

Maybe there is something wider going on that isn't to do with you or I @SameDayNewName

I’d check out your score with Experian and Credit Karma for a balanced view (between them they pull data from the three main credit agencies).

Be warned your credit score is purely an indication of how good you are to lend money to though! And ignore all the ads / suggestions on the credit score apps - they are marketing to you sometimes by stealth and with misleading pressure.

Thanks @Picklechicken that makes sense. Can I please ask, do you mean that Experian for example, might give us a different score? Or is it to do with "Equifax", who the report is from on Clearscore?

Absolutely nothing wrong with using a credit card responsibly, i.e. pay off the balance in full every month so you don't incur interest. You can also earn cash back, points, or similar by choosing a credit card "deal" appropriate to your spending patterns. If that's not enough, you get better protection if you buy anything over £100 by credit card in case the supplier goes bust or sells you dodgy/faulty/counterfeit goods where you can reclaim the cost from the credit card firm if you can't get the money back from the supplier. The vast majority of credit card holders have no problems, pay off their balances in full so incur no charges, - it's ALL about being organised and disciplined. For those who have poor self control, they can ask the credit card provider for a lower limit so they can't go mad with the spending!

All the credit agencies score different - Experian gives a score out of 999, Credit Karma gives a score out of 710, and each have different thresholds for what counts as ‘excellent’, ‘good’, ‘fair’ etc.

You might actually be better off clearing your overdraft with a credit card? It depends if you can get a better interest rate than your mortgage. Factor in any balance transfer fee too. Overdrafts can cost 40% interest - do you keep an eye on your statements to see how much you’re being charged?

Use Money Supermarket to get credit card quotes.

They all give different scores. My Clearscore is 760 something, my score with another one is less! Another one more!

OP, are you in other debt besides your OD?

Do not get a credit card, the charges can add up very quickly unless you pay it off every month.

My BS won't lend me any money even though I'm good for it. Cockwombles. I think it's the climate in finance now. Everyone is calling in tbeir debts.

That's why most people pay it off every month and never pay any interest.

Stop listening to people who know nothing about money.

A credit card paid off every month can make you money and improve your credit history as opposed to an overdraft which is the most expensive type of mainstream debt and your bank interprets as being bad with money if used regularly.

How much does your overdraft cost you and why are you 1000 in every month. Is it because you have to because you lose 1000 on the repayment so have to go back in to make up the difference?

You can get a money transfer off, use it to pay the overdraft and as long as you pay it off before the 0% offer ends you don’t pay interest. You don’t need to pay the whole thing off every month. I’ve been doing that for years, for various purchases. If I haven’t managed to pay it off by the end of the promotional period I just switch to another 0% offer.