Yes, an overdraft can affect your credit score, but using an arranged overdraft sensibly rarely does harm. Going over your limit, or sitting near it month after month, is what lenders mark down.
You are in good company. The FCA’s Financial Lives survey found that 21% of UK adults (11.4 million) were overdrawn at some point in the 12 months to May 2024.
This guide shows how an overdraft appears on your credit file, when it hurts your score and how lenders see it when you apply for a mortgage.
Overdraft and credit score: key figures at a glance
These are the facts readers ask about most: how often your bank reports your balance, how long searches and account records stay visible, and how common overdraft use is.
| What to know | Answer | Source |
|---|---|---|
| How often banks report your overdraft to credit reference agencies | Most banks and building societies send details once a month | Experian overdraft guide, checked October 2026 |
| How long a hard search stays visible to lenders | 1 year | Experian retention periods, checked October 2026 |
| How long lenders can use credit account data when they make decisions | 6 years | Experian retention periods, checked October 2026 |
| UK adults overdrawn at some point in the 12 months to May 2024 | 21% (11.4 million) | FCA Financial Lives 2024 |
| UK adults constantly or usually overdrawn by payday in 2024 | 8% (4.3 million) | FCA Financial Lives 2024 |
How does an overdraft show on your credit report?
An arranged overdraft shows on your credit report as a credit facility, along with your limit and how much of it you use. It looks much like a credit card limit.
An arranged overdraft is a limit you agree with your bank in advance. An unarranged overdraft happens when your balance falls below zero with no agreement in place, or when you pass your agreed limit.
A common belief is that you should never borrow if you want a good score. That is a myth. Lenders look for a pattern of borrowing and repaying, so stay within your limit and return to a positive balance when your pay arrives.
How often do banks report your overdraft?
Your bank passes details to credit reference agencies such as Experian, Equifax and TransUnion. You can see the same data in your credit report.
Experian says most banks send this once a month, so it records your balance on one day. A short dip before payday may never appear. Unarranged use, and any charges you fail to clear, do show.
Read more: Will Checking My Credit Report Affect My Credit Score?
Does an arranged overdraft affect your credit score?
An arranged overdraft is unlikely to damage your credit score if you stay inside your limit and clear it regularly. It can even help, because lenders see that you borrow and repay as agreed.
For example, say you use £200 of your arranged overdraft for a few days before payday, then clear it when your pay arrives. If your bank reports that week, the file shows a small balance cleared quickly, which looks like ordinary account management.
Three habits keep an arranged overdraft working in your favour:
- Stay below your agreed limit, with room to spare.
- Clear the balance regularly, ideally each payday.
- Keep enough in the account to cover direct debits.
A bank account you have held for years, with a clean record, also adds to your credit history.
Read more: How to boost your credit score
Can an overdraft help if you have a thin credit file?
A thin credit file means you have little credit history. You might have a bank account and one credit card, or no credit accounts at all. Young buyers, people who always pay cash and people who have just moved to the UK are typical examples.
Lenders find it harder to judge a thin file, because they cannot see how you have handled credit.
That does not rule out a mortgage. A broker can tell you which lenders will look at other evidence, such as rent payments or savings. You may need a bigger deposit, or a few months to build your record first.
Getting on the electoral roll, using a UK bank account and paying a credit card off on time all help. A mortgage broker can review your report and suggest the next step.
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When does an overdraft hurt your credit score?
An overdraft hurts your score when it suggests you are struggling to manage money. Four patterns can pull your score down.
Going past your limit. Spending beyond your arranged limit puts you in an unarranged overdraft. Lenders read that as borrowing without permission. Since April 2020, FCA pricing rules have said a bank cannot charge more for an unarranged overdraft than for an arranged one.
Living close to your limit. Say you have a £2,000 overdraft and you sit at £1,800 overdrawn week after week. You are using 90% of your limit. Lenders may decide you rely too heavily on borrowed money.
What happens if you cannot repay your overdraft?
Failed payments. If your account cannot cover a direct debit, the payment can bounce. Bounced payments can pull your score down, especially when they follow each other.
Unpaid overdraft debt. If you stop bringing your account back into credit, the bank can mark it as in arrears, or even default it. Experian lets lenders use credit account data for six years when they make decisions, so a default can count against you for up to that long.
Read more: Credit score gone down? Here is what you need to know
Does applying for or increasing an overdraft affect your credit score?
Applying for an overdraft, or asking to raise your limit, can trigger a credit check. The effect on your score depends on the type of search.
A soft search leaves a footprint that only you can see. A hard search leaves one that other lenders can see. Many banks use a soft search for an overdraft increase, but some use a hard one. Experian keeps hard searches visible to lenders for one year and soft searches on your file for the same period.
One hard search rarely does much harm. A string of credit applications in a short space of time can look like money trouble. Some banks offer an eligibility checker that uses a soft search. If yours does, use it before you apply.
What about student and business overdrafts?
A student overdraft is an arranged overdraft, so it affects your score in the same way. Equifax says it will not hurt your score as long as you pay it off on time. After you graduate, you usually get two to three years to repay an interest-free overdraft, and the bank cuts your interest-free limit each year. Have a repayment plan before the interest starts.
Related reading: Does a student loan affect your mortgage?
Business overdrafts work differently.
They mainly affect your business credit profile. They can touch your personal score if you gave a personal guarantee. A sole trader and their business are the same legal person, so the two credit records are closely linked. Ask your bank which file the overdraft will appear on.
Bank account with overdraft for bad credit: what are your options?
A bank account with an overdraft is harder to get with bad credit, because banks check your credit file before they offer one. You may get a low limit, or no overdraft at all.
If you want a current account with an overdraft and your record is poor, you have three realistic routes:
- Apply for a standard account with a small limit, and use it carefully.
- Ask your own bank, because it can see how you run your account.
- Open a basic bank account. Citizens Advice says you can usually open one even if a credit check shows bad debts or county court judgments. You cannot go overdrawn on a basic account.
Rebuild your record while you wait. Pay bills on time, keep any overdraft inside its limit and check your credit score for errors.
Does being in overdraft affect mortgage application decisions?
Yes, it can. When you apply for a mortgage, lenders look at your bank statements, not only your credit report. Many ask for the last three months, and some ask for more.
They want to see how often you use your overdraft and whether you return to credit. FCA rules say a lender must take full account of your income and your committed spending, and it should check the debts you declare. Bank statements are one way of doing that.
Should you clear your overdraft before you apply for a mortgage?
For example, say you apply for a £500,000 mortgage. Your statements show you at £1,800 of a £2,000 overdraft all month. The lender sees £1,800 of borrowing that never clears, and little spare cash.
Clearing the overdraft is easier to say than to do. If the money has to come from your wages, it can take months, and a lender that reads your recent statements will still see the borrowing in the older ones. Start early, and keep the account in credit from then on.
Occasional use of an arranged overdraft can be acceptable if the rest of your account looks tidy. A rising balance, or regular unarranged borrowing, can reduce how much a lender will offer. Every lender sets its own rules, so two lenders can read the same statements differently.
There is one exception.
If you take a debt consolidation loan to repay the overdraft, lenders look at the new repayments instead. Those repayments must be affordable alongside your other spending.
Read more: Does an overdraft affect a mortgage application?
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How to use your overdraft without hurting your credit score
Small habits protect your score and your mortgage chances.
- Set balance alerts. Ask your banking app to warn you when your balance gets close to zero.
- Move your direct debits. Pay bills such as council tax just after payday, so less of the month starts in the red.
- Build a small buffer. Even £50 a month adds up to £600 in a year and cuts the days you spend overdrawn.
- Review your account. If you stay overdrawn most months, a different account may cost less.
- Check your limit. Some lenders may look at your overdraft limit as well as what you use. Ask a broker whether a lower limit would help before you apply.
Where to get help with overdraft worries
Start by talking to your bank. Since December 2019, FCA rules say banks must spot customers who use their overdraft again and again, and take action to help them. That can mean a cheaper account or a plan to reduce the balance.
Free debt advice is also available. GOV.UK lists free, independent services including National Debtline, Citizens Advice and StepChange. They can look at your whole situation, explain your rights and build a plan with you.
Talk to a mortgage broker before you apply
If you plan to apply for a mortgage, speak to an independent mortgage broker first. Brokers know which lenders take a more flexible view of overdraft use. They can also help you prepare your application so it answers those questions up front.
Try to speak to a broker at least six months before you need the mortgage. That gives time to analyse your position and for any changes to take effect. Respect Mortgages is not a broker and does not give advice, but we can introduce you to an independent, whole-of-market broker.
Read more: Why should you use a mortgage broker?
Frequently Asked Questions
Within your arranged limit, going slightly overdrawn does not automatically harm your score. Lenders look at the whole pattern: whether you stay inside your limit and return to a positive balance when your pay arrives. Going past your limit, even by a small amount, is treated differently.
Yes, it can. An unarranged overdraft shows lenders that you borrowed without agreement, and any unpaid charges can appear on your credit file. One slip is unlikely to ruin your score. Regular use is the problem, because it suggests you struggle to manage your money.
It can help if you use it well. An arranged overdraft shows lenders you can borrow and repay as agreed, which matters most if you have a thin credit file. A credit card paid off in full each month builds a record in the same way.
It depends on the type of search. A soft search does not affect your score, but a hard search is visible to other lenders for a year. Your bank may check your credit file when you apply for an overdraft or a higher limit, so ask which type it uses. A run of applications in a short time can look like financial stress.
Experian lets lenders use credit account data for six years when they make decisions. Hard searches stay visible to lenders for one year, and soft searches stay on your file for one year, although only you can see them. Lenders also look at your recent activity, such as your latest statements, so a clean recent record helps.
Yes. Lenders look at how much of your overdraft you use and how long you stay in it. Short dips that you clear each month sit more comfortably with a lender than a balance that stays high all month. Heavy use can reduce how much you can borrow, so paying the balance down before you apply is worth considering. Read our guide on getting a mortgage with an overdraft for more detail.
