Does an overdraft hurt your credit score?

Last Modified 16th of February 2021

In short, no. In the normal run of things an overdraft shouldn’t negatively impact your credit score. In fact, it is a form of credit and using one responsibly will add to your credit history and improve your credit worthiness, so it can be a really positive thing.

There are of course instances where any credit can hurt your ability to get a loan and overdrafts are potentially one of the most abused.

Long standing credit

To build a good credit history you need to borrow money and then pay it off consistently and in a timely manner. With an overdraft it is all too easy to max out your allowance and then remain close to the limit for an extended period, this won’t help your credit.

Unauthorised overdrafts

The above of course applies to using an overdraft that you have formally agreed with your bank – it is there for you to use as you wish. However, if you don’t have one in place you might be given an unauthorised overdraft as a result of trying to make a payment when you don’t have the funds to cover the amount. This is definitely harmful to your credit score and it will also cost you money in the form of bank charges.

Other effects on your credit

Of course, an overdraft doesn’t have to negatively impact your credit rating to affect your ability to borrow. When you come to apply for a loan the bank will look at your credit history as well as your income and work out what they think you can afford.


As part of this calculation they will consider what other loans you are already paying and also what other credit you have access too. Normally the benefits of having an overdraft available will outweigh this downside (as long as you use it responsibly) but there are instances when a large overdraft (even if you aren’t actually using it) will hinder your ability to borrow.