Our overdrafts are changing

Yes but how many people will that apply to? It’s only offline payments

You’re making an assumption that it is only offline payments - banks also allow you to go slightly overdrawn for a whole variety of reasons.

As for offline transactions - everyone has them from time to time, some more then others.

Such as? As they’ll stop all payments that they can that will take you into an unauthorised overdraft, I can only think of overdraft charges

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There already is. It’s called paying back your overdraft. Starling brought it to the attention of the people who don’t want to be moved onto the stepped rates in April.

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Yes because everyone who is overdrawn can afford to pay their overdrafts off immediately

Overdrafts are not meant to be used for long term borrowing but there are many who have used their overdrafts for long term borrowing and live in them from payday to payday

These people are the ones likely to be paying 49%, 39% or 35% depending on bank. They are unlikely to be able to transfer that borrowing elsewhere to cheaper borrowing and as evidenced by the FCS’s letter to all banks asking them to justify their prices they are the ones the new regulations were designed to protect

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Hi @ccoouuss

A few of you have been asking how your credit score affects the rate we offer you for your overdraft (both here and on reddit).

I replied to this question with the details on how we decide your overdraft rate on reddit yesterday, but going to share it on the forum as well, as a lot of people are interested! Here’s what I posted on Reddit:

Hi all,

Ofelia from Monzo here, I wanted to shed some light into how we decide to give you a certain overdraft rate and limit, or why we’ve decided not to offer you an overdraft. I realise that there’s some confusion over whether we only use the Credit Karma score to make the decision, so hopefully this helps!

Here’s how we make the decision today.

There are 2 factors we take into account: your credit report and how much we think you can comfortably afford to borrow.

When we first offer you an overdraft, we look at your credit score and report to decide if we’re happy to lend to you, and at what rate.

At the moment we get your credit score and report directly from TransUnion. TransUnion also power Credit Karma (which shows the score most of you will be familiar with). The two scores tend to be highly correlated, but they’re not exactly the same and there are some cases where they can be different – for the vast majority of people though these two will be very similar.

To add to that, TransUnion have 2 different types of scores: ‘Acquisition score’ and ‘Account Management score’, and we use one or the other depending on whether you’ve had a credit search in the past 3 months. These two scores are also slightly different.

So, when you apply for an overdraft at Monzo we look at the TransUnion score that’s relevant for you at that moment in time, and decide whether we’re happy to lend to you and what your rate should be. We’ll also take into account issues like County Court Judgments or insolvencies on your report. This is how we give you a rate of 19%, 29% or 39% EAR, or decide we’re not comfortable offering you an overdraft.

Your “affordability” determines how much we think we can lend you, so you can comfortably afford to pay it back.

We need to make sure that we only lend people an amount of money that they can safely pay back. At the moment we’re being very conservative with our approach.

First, we ask you some questions about your employment status and your income. We also contact TransUnion to verify your income. We then use that information to decide if we can lend to you, and how much.

Sometimes we don’t have enough information, or the income we see through TransUnion varies a lot, and in these cases we won’t be able to lend to you. This might not mean that you can’t afford to borrow from us, but because we don’t have enough information we can’t make an informed decision.

There are some other edge cases, where we can validate your income but we might still decide not to lend to you. For example if you have a shared mortgage where we don’t know what the split of the payments is.

So if you have a TransUnion score we’re comfortable lending to, and we think you can comfortably afford the repayments, then we can offer you a Monzo overdraft. We’re always working to make our decisions smarter, and we have a whole squad dedicated to helping us lend to more people, responsibly.

We won’t take away or change an overdraft you’re using if your score changes.

If you already have an overdraft with us and your credit score changes, we won’t take the overdraft away, and we won’t reduce your limit. But if you reduce your overdraft limit or turn your overdraft off, then you may not be able to increase your limit again if you’re not eligible any more.

Hopefully that helps to explain more behind our decision making!

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Hi Ofelia :wave:

First question, that line can’t be right can it? Doesn’t your responsibility as a lender mean that if a persons circumstances change and become more risk shouldn’t they be moved onto 39% and/or told it will need to be reduced, or the other way 19% if they are less risk and/or be offered a higher amount (if the customer wants it)? Or moved to the 29% if they fit somewhere between.

Second question is how does Experian now fit into this. Are you simply reporting to them, or do you also get the monthly report from them and cross reference the details with the TransUnion report, including estimated salary etc

Third question can we see more of this replying in detail here in the Monzo forum before other parts of the internet. Theres many occasions where an answer is needed to stop an endless circle of speculation that could be vastly improved if we see more staff participation in the thread and not just posting the OP and disappearing and letting customers squabble. It would be greatly appreciated by Monzo customers.

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Just out of interest, is there anything in the FCA ruling that prevents a bank from having a de-facto daily fee dressed up in the interest rate? Could Monzo, for instance, charge 19%, as per the rules, but have a policy of capping those interest fees at £15.50 per month? In effect, preserving the 50p/day system (that, let’s face it, wasn’t the target of the rules changes), whilst ostensibly obeying the ruling by using an interest rate?

Essentially, what I’m saying is, does any part of the rules ban a cap on charges arising from the interest rates?

The Monzo app no longer offers me an overdraft, has Monzo changed their lending criteria?

This seems to change quite often;

  • Yes you can have an overdraft. I’m sorry, we can’t offer you an overdraft
  • Yes you can have a loan. I’m sorry, we can’t offer you a loan

Get them while you can.

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Well for both overdraft and loan when you view the section it gives you an up-to-date offer. So it can change multiple times within the same month.

This offer is based on your previous month’s report. So Feb is Jan, Mar is Feb and taken once a month. It’s now both TransUnion and Experian, with a bit of cross referencing.

Along with risk is affordability and est income, so you could be low risk with a very nice report but they might be wary that you’ll be able to afford it with your other committments. If the delta is too much between est and provided income that will result in a nope.

Unfortunately they appear to be getting this a bit wrong a lot of the time, but they are fully aware it needs work.

It’s rather frustrating as you can’t rely on it despite what the words say “whenever you need it”, and feels like it’s based on wind direction at times.

I have a theory it’s heavily weighted based on monzo balance but too early to make any conclusions.



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I wonder if it is because I signed up for a Amex in Jan?

You’re reassessed every month so if you’re borderline then that makes sense.

I would reckon due to the delay between reporting the change and it appearing on your report Jan changes would be reflected earliest in Mar Monzo calculations.

Whilst the report is taken once a month. The reassessment takes place every time you check.

On checking during the same month it changes multiple times.

If it was based solely on the just the report you should in theory get exactly the same offer say 1-29th Feb, or 1-31st Mar etc

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Makes sense :+1:

I wouldn’t think I am which is what surprises me

Nobody on here will know for certain either way as each person’s circumstances are unique. If you really want one then speak to Monzo like I did and they’ll help you understand why.

I have no need for an overdraft, I was more curious.

You’re not going to get a definitive answer on here.