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| Wells Fargo workers say they remain under heavy pressure to squeeze extra money out of customers. New York Times |
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Wells Fargo to shut down all personal credit lines. Here’s why that can hurt your credit score.
NJ.com
July 8, 2021
Wells Fargo is eliminating all personal lines of credit in the next couple of weeks, according to a customer letter reviewed by CNBC.
The credit lines, which generally run between $3,000 and $100,000, were marketed as a way for consumers to consolidate high interest credit card debt, pay for home improvements or avoid overdraft fees on checking accounts that were linked to the credit lines.
Consumers who have outstanding balances will have to make required minimum payments, the six-page letter said, and the bank will no longer offer new credit lines.
Wells Fargo didn’t immediately respond to questions about the report and the customer letter.
Importantly, Wells Fargo noted in the letter, the account closures may have an impact on consumer credit scores.
That’s because open lines of credit are part of a credit score calculation called the credit utilization ratio. It compares the amount of a consumer’s available credit with outstanding balances. When the amount of available credit goes down compared to the balances owed, it means a consumer is using more of their available credit — a negative for credit scores.
For example, if you have $30,000 of available credit with balances of $10,000, you’re using a third of your available credit.
But if part of your credit includes a $10,000 credit line, and that line is closed, you will now be using 50% of your available credit, something that looks less attractive to lenders.
If you have a Wells Fargo credit line with a balance and you don’t want the account closure to hurt your credit score, consider paying off the balance as soon as you can. If you’re unable to, consider opening a new account with an available balance that’s the same as the one being closed to avoid changes in your credit utilization ratio. Just don’t build a new balance on the new account, otherwise you’ll undo the benefits of a higher credit limit to your credit score.
While Wells Fargo didn’t specifically say why it was getting out of the personal credit line business, CNBC said the bank was stepping back from some financial products because of Federal Reserve limitations that were imposed in 2018 after the Wells Fargo fake accounts scandal.
Last year, Wells Fargo stopped writing new home equity lines of credit, CNBC said.
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