Maybe you can clarify for me? Do you have sufficient money in those other accounts to cover your Monzo overdraft?
Opinions vary, but being in positive balance everywhere seems more advantageous for your credit history than keeping all your money there and continually owing Monzo (even if only in buffer zone)
Most months Iām in credit, so the constant -Ā£20 yes.
All banks have āinternal scoringā which is in addition to your credit score. In simple terms (as their system is a bit crazy) Lloyds is 1-9 for MOST customers. 9 is essentially highest risk (virtually no/limited lending), 1 is lowest.
Things like # of days in credit, average amount in account, total in account over the month etc. affect it
Something awful on your external credit and youāre stuffed anyway.
But assuming a good/reasonable credit report, thinks like salary in, credit balances etc are then converted to an internal score. So internal Lloyds score of 1 and youāre looking to get offered loans/ODs/cards etc - all of which Monzo donāt offer at great rates currently.
Leave your account dormant and itāll basically be going on external (credit report) only, meaning youād probably be band 4/5/6 or whatever unless you had exceptionally high income.
Say you need to make a loan application at Lloyds - if you are a band 4/5 and you wonāt be getting the best rates. If you are band 1 or 2 through salary payments, high credit balance etc, then you should almost certainly get the representative rate (or below, if that particular product offers even lower to some customers).
If Iām going to leave one account at Ā£0, itāll be Monzo rather than Lloyds for essentially that reason.
Monzo may internally score me badly for being at Ā£0/overdrawn, but their credit offering is poor so I wouldnāt need it. Lloyds on the other hand I want them to score me better incase I do ever get one of their loans etc.
Whether internal scoring plays a part in Mortgage acceptance Iām not sure, but one of their mortgage advisers suggested to my friend she had an āexcellent credit scoreā (so presumably risk band 1/2/3 as thatās the type of thing they can see), so perhaps it does.
My Monzo OD also doesnāt report to CRAs for some reason - if it did, Iād probably keep it at zero! As like you say constant OD can affect external/main credit report.
Does anyone know what Monzo is planning on doing about this?
I guess they can no longer charge 50p a day? Are they moving to an APR model or? I havenāt seen anything from them?
Not good for Monzo. No chances to charge 0.50p for Ā£30 overdrawnā¦
The new rules come into effect April 2020, so weāll hear from Monzo anytime between now and then I guess.
They will have to switch to single APR model. They have no choice.
All the banks will have to switch to a single Apr model. As most banks make money from overdrafts and will lose money from this change, they will find another way to make it.
Possibly by charging for having an account or high interest rates for going overdrawn and preventing unauthorised overdrafts.
While I agree with this change, it may not have the effect the FCA is expecting.
Have you checked Credit Karma (formerly Noddle)? Monzo do report to one CRA and this is where their results show up (was CallCredit, but appears Credit Karma acquired them when they purchased TransUnion).
Yep, have alerts through one of my old credit building cards - can see they credit searched me so definitely got the right personā¦ they just arenāt reporting the account.
Guessing itās a bug, but Iām not complaining - if/when they start reporting it I guess Iāll have to leave it at zero! Although we may actually have a fair OD structure by then.
I guess when they change to APR the interest free threshold will be the first thing to go - people with <Ā£500 ODs are heavily subsidising the āfreeā/buffer zone.
100% - think theyāre going to be going for a risk based pricing model sadly - FCA acknowledged that in their paper.
I did find FCAās comment that people view an unauthorised OD as a ācustomer serviceā feature very interesting!
I guess it is true for some people, but I doubt itād make a significant difference if banks just blocked unauthorised ODs full stop (apart from āofflineā transactions like low value contactless etc.) now they canāt charge through the nose for them.
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