Can Loan Debt Stop You Extending Your Overdraft?
Every time you apply for, or receive any kind of credit, this will be recorded in your own personal credit report. This means that if you have a loan, any other lender will be able to see the full outstanding amount along with any other debts that you may have, including credit cards and overdrafts. They will then use this information to provide a decision on any further credit applications.
So does this include overdrafts?
Banks are generally not in the business of taking undue risks, particularly since the banking crash in 2008. This means that they employ rigorous checks on any loan applications or overdraft extension requests. Whilst the length of time that you’ve been a customer will be a factor, credit checks will often be used to decide whether an application is successful or not.
What appears on your credit history?
Your credit rating is based on your outstanding debts and also any issues may have had with lenders in the past. Each person is provided with an individual ‘score’ which is then used to determine their risk rating and whether they can afford further debt. After all, if someone already had thousands of pounds worth of outstanding loans and a huge overdraft, offering them more credit would only serve to increase their risk.
Your history will take into account any instances where you have failed to repay loans, missed direct debits and if you have ever declared bankruptcy. These will all count against you and can remain on your profile for many years and so will continue to impact credit applications. Unfortunately there’s no instant remedy for any such problems, so all you can do is continue to repay debts and avoid exceeding overdrafts or missing payments.
How might a loan affect your overdraft?