Wells Fargo ends personal lines of credit: What it means for consumers
Wells Fargo customers have begun receiving notification that their personal line of credit accounts will close, and the company confirmed Thursday that it will no longer offer the product. Once the accounts are closed, customers will no longer be able to draw from them.
The company announced that it would discontinue the product last year, said Wells Fargo spokesperson Manuel Venegas in an emailed statement. But if the looming closure of your account is news to you, it may be an unwelcome surprise.
Not only will the accounts close, but Wells Fargo also indicated consumers’ credit scores may take a hit as a result.
“We realize change can be inconvenient, especially when customer credit may be impacted,” Venegas said.
Here’s what you need to know if your account will be closed, how your credit may be affected and other borrowing options to consider.
What to expect when your account is closed
Customers will receive 60 days’ notice ahead of their account closure, Venegas said in the statement, along with reminders leading up to it. This could be a signal that it’s time to stop making withdrawals and turn your attention to repayment.
Once the account is closed and you can no longer draw from it, your annual percentage rate will be frozen and that’s the rate you’ll pay on the remaining balance, Venegas confirmed.
The revolving lines of credit, offered in amounts from $3,000 to $100,000, could be used by Wells Fargo customers to consolidate high-interest debt and pay for large expenses.
He also confirmed that no other Wells Fargo products are affected, and it will continue to offer credit cards and personal loans.
How your credit score could be affected
The effect of a Wells Fargo line of credit depends on your unique credit profile, said Tommy Lee, principal scientist for the FICO data and credit scoring company, in an emailed statement.
Several factors affect your credit score, and your available credit compared to credit used has a big influence. If you have multiple open credit cards with high limits and low balances, then the impact should be low. But if your other accounts have low limits and high balances, it could hurt.
“When a line of credit is closed, some of your available credit is off the table,” Lee said. ”The lower your ratio of balances to your total credit limits, the better with respect to your FICO score.”
Closing an account also reduces your average age of accounts and your number of accounts, both of which have a smaller influence on your score.
How to protect your score
- Pay all bills on time. Payment history is the largest factor in credit scores.
- If you need to replace your line of credit, be strategic. If you’ve applied for credit recently, you may want to wait a few months because multiple applications in a short time can lower scores.
- Keep an eye on your credit reports to be sure the Wells Fargo change is being reported correctly. You have free, weekly access to your credit reports by using annualcreditreport.com.
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