@Anonymous wrote:
I was just approved for a 3200 overdraft line of credit from my CU, im curious to know if anyone has any experience with this type of credit. Can it be used like a CC? Would it hurt or improve my score? I did speak with my credit union and they advised me that I could use it anyway I like, I could take out 3200 today or use it for emergency funds, or like a CC. I guess im just a little leery bc I didnt expect to be approved for this, and the fact that its termed as "overdraft' credit makes me think it should be only used in the case of overdrafts. Im trying to improve my score which is currently 626 experian, 600TU and 615 equifax so I want to be careful..I would appreciate any advice.
I think there may be variances in how these LOCs report. You may want to ask your CU whether or not this line will be reported to the CRAs and how it will be reported.
If it is reported, it may be counted in your available revolving credit and could help your util %. If you carry any cc balances and leave this line basically untouched, it could really help. It could also hurt if it is counted in your util and you go out and use the full amount. In that case, it would show as 100% util on that account.
As for reporting pros and cons...I have a HELOC of $150k that reports on my TU accounts as "Overdraft/Reserve." My HELOC is definitely not overdraft credit...but that's how it reports. It does not hurt us that it reports that way.
If you feel this LOC may be beneficial to you, from my past experience with this type of account, I would give the following advice. Don't let it turn into what my banker calls "permadebt." These accounts are meant to be for overdrafts and emergencies. Don't let it run up to the max and stay there. Handling this account responsibly could help you exhibit a good track record with your CU. So, if you can take the LOC and not use it up, I would consider doing it.
One last piece of advice...this is a loan. If you have a balance, you have to make payments on it by a certain date each month. Back in the days when my husband and I had such a line, we would use it...pay it off...use it...pay it off... That's a good thing to do. What we missed then, however, (in our unorganized-credit days) was that there was a payment due by a certain date each month. We didn't even realize there was a set date...so...those are the only lates my husband now has on his CRs. From 2002-2003, so they'll soon be gone. You have to watch your dates carefully.
For example: Say you use $100 of the line on the 1st of June. Your payment is due on the 2nd of June, but you don't make it (heck..youu just got the money, right?) You use the money for a month or so, and pay it back on the 3rd of July (about 33 days later). Well..you just missed your June 2nd payment by 30 days. That was all it took to get us some lates. Bottom line? Our HELOC works this way as well. So, the first thing we did when we got our HELOC was set up an automatic minimum payment each month directly from our checking account. That way we can use a little or use a lot, we can pay a little or pay a lot, but our minimum payment is always made on time. Live and learn...
