Is overdraft bad for your credit rating?

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Viper25

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I know a few people who live in overdraft.
Is overdraft bad for your credit rating?
 
I tihnk when you pull a credit report it shows the total credit available to you, and then they calculate if you can afford that total credit, before deciding to give you more credit... so I personally don't see how an overdraft is different to a credit card.

I think they also look at how much you've used, e.g. you have an overdraft of R40,000 and have used R20,000 - can you afford the repayment.

Could be wrong.
 
An overdraft is good for your credit record if you use it judicously.

That is, use it (but not excessively), and then repay, wait for a while before going into overdraft again, etc.
 
It does count towards your debt, even if you don't use it. The reason being is that its instantly available to you, so in other words the bank has already loaned you the money and its sitting in your account.

I still rate its a good thing to have and not use. I go in to overdraft every few months to the tune of R50 or so, its better than coming short. I think it is good for your credit rating if you don't use it a lot.
 
Only way an overdraft would be bad for your credit rating is when you fall behind on payments etc. Then you'll get blacklisted etc.

Other than that it's a surefire way of attracting more debt.
 
+1
you have to have debt to get more debt.
how you get debt in the first place is the tricky part :)
 
Thanks for the replies.
Reason I asked is because for the first time ever, I made use
of overdraft, was kinda scary :)

Ill just pay it off at the end of the month.
The cost of living is just too expensive these days.
 
Having an overdraft and using it is not bad for your credit record.

Constantly living in the overdraft without repaying over a period of time is a bad thing. It shows that you constantly spend more than you earn. Going into overdraft occasionally, and coming out of it does not affect your overdraft.

I have never understood this "how much credit you have" thing. I have lots of credit.
 
Living in overdraft is bad - but great for your rating, providing you pay back.
 
Why do people have overdrafts? I can understand if you are a business owner and use this ONLY when payments coming in are late, like I used to work in construction and managed the day to day ops...my uncle's banker recomended an overdraft and it worked, as anyone who've worked in construction knows...you seldom get your money when you WANT/AGREED/BEG for it from clients.

Anyhoo, if you don' town a business, I can't understand why anyone would want an overdraft, a credit card is already a kind of overdraft, i.e giving you money you don't really have...or, basically a monthly personal loan...
 
ALFAHOLIC said:
Why do people have overdrafts? I can understand if you are a business owner and use this ONLY when payments coming in are late, like I used to work in construction and managed the day to day ops...my uncle's banker recomended an overdraft and it worked, as anyone who've worked in construction knows...you seldom get your money when you WANT/AGREED/BEG for it from clients.

Anyhoo, if you don' town a business, I can't understand why anyone would want an overdraft, a credit card is already a kind of overdraft, i.e giving you money you don't really have...or, basically a monthly personal loan...
Click to expand...

I like having my overdraft for when unexpected things happen.

For example, when the tenant pays the rent late, and the bond still goes off. Or MTN takes off 3x my usual cellphone bill.

It doesn't make sense keeping excess funds in my cheque account earning no interest. So, if something stupid happens, I dip into the overdraft for a day or two until I can sort it out.

The bank looks very badly on R/D's (cheques which bounce or debit orders returned)...so the overdraft is there "incase".
 
ALFAHOLIC said:
I thought the credit card was the INCASE?
Click to expand...

Overdraft is on your normal cheque account I believe and credit card is a completely separate account. So if a debit order goes off on your cheque account and you don't have enough funds or an overdraft, the debit order will bounce, not go off on your credit card. Where as if you have an overdraft and don't have enough funds, it will dip into the overdraft and you won't get slapped with a big fee for having a debit order bounce.

Debt is fine if managed properly, the mistake most make is that they can't control what they buy and end up spending more than they earn.

AFAIK debt is never bad for your credit rating if you always make your payments on time and aren't too deep in the red. If you've never had credit before, that's worse for your rating than having an overdraft and always paying it off on time.
 
Yea - and battled to see my 42" as well ... Pretty much a neccesity ;)

As was a better camera, trip to Kenya, mapping software on my car ...
 
Dolby said:
Yea - and battled to see my 42" as well ... Pretty much a neccesity ;)

As was a better camera, trip to Kenya, mapping software on my car ...
Click to expand...

hhmm, lemme see what my credit card is/was for...

Can't really remember, oh, road trip to CT for world cup/camera...****e that's it, everything else, all those thousands spent for the past 8months were all in vain! This month, we actualy havn't used the credit card, as we're at home waiting for baby to come! My word there's a strategy to lesson your debt...get a pregnant woman
 
ALFAHOLIC said:
Why do people have overdrafts?
Click to expand...

The interest on my overdraft facility is lower than the interest I'd pay on a credit card or personal loan. So that's probably one reason why some people have, and use, overdrafts.
 
the best part of overdraft debt is that its the most visible kind.
you can't ignore that glaring negative balance nagging you until pay day every month :)
 
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