Does an overdraft affect your credit score? Having one, on the lenders’ own explainers, is unlikely to harm it. What can do damage is how it is used: going past the agreed limit into an unarranged overdraft, falling behind on repayments, or leaving arrears unpaid long enough to become a default.
This desk read the FCA Handbook’s overdraft repeat-use chapter and three lenders’ explainers on 18 October 2026. The question is evergreen.
Does an arranged overdraft affect your credit score?
Monzo’s guide says having an overdraft “is unlikely to impact your credit score, but how you use it can”. first direct says using an arranged overdraft is unlikely to hurt your score. Capital One UK says occasional, well-managed use is unlikely to cause harm, but that long-term use can indicate ongoing financial issues.
Does an unarranged overdraft affect your credit score?
first direct says going past the agreed limit, or below zero with no arranged overdraft, can signal to lenders that you are struggling. Capital One says an unpaid overdraft could be marked as in arrears or defaulted, which can stay on your credit report for six years. On arrears, see what happens if you miss a personal loan payment.
What if you are in your overdraft every month?
CONC 5D, which the Handbook says was last updated on 26/06/2026, states its purpose as requiring firms to monitor patterns of overdraft use, identify repeat use and take steps to change it. Rule 5D.2.1R covers arranged and unarranged overdrafts and says a firm must identify repeat users “as early as possible”, splitting those with signs of actual or potential financial difficulty from all others. Guidance at 5D.2.3G says the rule does not specify the frequency, duration or amount of drawings that count; banks decide. The chapter does not apply to private banks, credit unions, or accounts usable in a non-UK currency.
| Repeat user | What CONC 5D.3 says the firm must do |
|---|---|
| No signs of difficulty, likely to continue (5D.3.1R) | A first communication on the pattern and possible “high avoidable costs”; a second after a reasonable period; then at least annually until it stops |
| Signs of actual or potential difficulty (5D.3.2R) | Prompt contact and suitable options to reduce use; explain that not engaging may mean suspension, removal or a lower limit; that does not apply where those steps would cause financial hardship |
Two cautions. In the text read, CONC 5D does not mention credit files or credit reference agencies: it governs what the bank does, not what your score does. And habitual use costs money regardless. Monzo prices its overdraft at 19%, 29% or 39% EAR (variable), depending on your credit score; its representative example is £1,200 for 30 days at 39.0% costing £32.94.
For other causes, see why has my credit score gone down and what credit score you need for a mortgage.
FAQ
Does an overdraft appear on my credit report?
The lenders’ pages say parts of it can. first direct says an approved higher limit will be recorded on your credit file, and Capital One UK says going past your arranged limit can bring negative marks on it. Capital One also says an unpaid overdraft marked as in arrears or defaulted can stay on your credit report for six years.
Does increasing your overdraft affect your credit rating?
It can. first direct says that when you ask for a higher limit a lender may run a hard credit search, which could affect your score, and that the new limit is recorded if approved. The page, in the text read, does not say how large that effect is.
Does an overdraft affect a mortgage application?
Capital One UK says an overdraft adds to your unsecured debt, and that high overall borrowing can affect your debt-to-income ratio and influence lending decisions. On that reading, a balance that never clears matters to a lender beyond whatever your score reads.
Loan Herald is a publisher, not a lender or broker, and is not authorised by the FCA. If a repeat-use letter arrives, read it against your own bank’s terms.