Tertiary Accounts - Interest Free Overdrafts


#1

I have a tertiary account and have had one for 4 years but never used the interest free overdraft.

Assuming I am good with money, is it dumb not to take advantage of an interest free overdraft of $2000, as I will not fall down the trap of relying on it once it is no longer interest free.

Say I have it sitting at an average of -$1,500, that means I will have an extra $1,500 in interest bearing accounts earning $45 and only costing me $24 a year in facility fee. It is not going to earn me much but it will give me on average $500 available on my eftpos card (currently I just transfer when I need it, because I rarely use it).

If the banks are willing to give me a $2,000 overdraft then why are they only willing to give me $500 credit card. The $500 credit card is the reason I moved most of my banking away from BNZ (not because other banks will give me a higher limit credit card, but because I am annoyed with BNZ)


#2

Also does having an overdraft reflect negatively on a credit score?


#3

Sam, use the interest free overdraft.  Then pay it back. Then use it. It will show you can handle credit and as you say, be “good with money”. If you can also get interest on it, even better. Also use all the credit on your credit card. Then pay it back within the interest free period. Do that a few times. Then apply for a bigger limit. You have established you can handle the current limit and that it is insufficient for your spending patterns.


#4

Regarding the credit score.
An overdraft will normally appear on your credit report at the time the overdraft was applied for. This is also when credit score points would have been deducted.
The bank may not necessarily have listed the overdraft facility against your credit report.
The only way to know is to get a copy of your credit report from Veda. You have to pay $51.95 for the credit score.
My advice is get the free report first (which doesn’t include the score) from Veda and see if the overdraft entry is on there.
If you do pay Veda the $51.95 it will show the score as one figure at the time you order the report.
The report never shows you how many points you lose for each individual entry. There will be just one score out of 1000.

I know that I lose about 30 points when I open a bank account. I only know that because I obtain my credit report with the score before and after I open the account so I can see how the score changes.

The banks seem to be using Veda more so if you obtain a new overdraft or credit card facility that will most likely appear on your Veda report and points deducted at the time.

If you increase the limit of an overdraft facility or a credit card, the bank will likely update your credit report and that will deduct points from the all important Veda score.

Its good to know that if a bank is asking you for your permission to obtain a credit check, you should ask them if its with Veda. They will probably say Yes. Then you know that points are going to be deducted from your credit score because the bank will be making an enquiry against your credit report, which causes a reduction in points.

Using the actual facility of the overdraft won’t affect the credit score. But the comprehensive reporting may show if your account goes over the limit.

That’s as I understand how credit reporting and scoring works.
Perhaps BNZ can provide their understanding