Wells Fargo recently announced that the bank is shutting down all existing personal lines of credit. According to reports, customers have been given a 60-day notice that their account will be closed.
If you have a Wells Fargo personal line of credit, your credit score could be impacted. Here’s what you need to know.
Is a personal line of credit the same as a credit card?
They are similar. A credit card is a type of personal credit line, but the main difference is that a credit card has a physical card and a personal line of credit does not. Another big differentiator between the two is how they are used. Common reasons for taking out a personal line of credit include home renovations or debt consolidation. Credit cards are often used for daily purchases.
In the case with Wells Fargo, only the personal lines of credit are affected.
What this could mean for you
If you have a personal line of credit with Wells Fargo, this could negatively impact your credit score. Here’s why:
- Credit Utilization: Credit utilization is the amount of total debt versus total credit limit. With the closure of this account, your overall available credit would decrease, which could impact your score.
- Credit Age: If your Wells Fargo account is one you’ve had for a few years, the average age of your credit profile could decrease when the account is closed.
- Credit Mix: This factors into your credit score because lenders like to see that you can handle multiple types of credit products (i.e. credit cards, auto loan, personal line of credit, etc.). The more types of credit you have, the better your score could be.
- Payment History: If the closure impacts your minimum monthly payment because the bank now wants you to pay it off faster, you could risk missing payments if you cannot afford the new amount.
“It’s really unfortunate because it’s impacting the customer more than the bank,” said Miro Pavletic, Head of Global Banking at Credit Sesame. This impact on your credit can cost thousands of dollars in terms of higher interest fees from decreased credit scores, especially if you are in the market to purchase a new home or car. It is also likely to hurt many people who used these credit lines to consolidate and pay down debt post-pandemic.
What you can do about it
- Confirm if you’re affected. If you have a personal line of credit from Wells Fargo and are not sure if this applies to you or if you haven’t yet received the 60-day notice, we recommend reaching out to Wells Fargo directly and confirming. This can help you prepare for any next steps to take.
- Continue to make on-time payments on all your lines of credit. Payment history is the number one factor affecting your credit score. Paying all of your bills on time can help keep your credit score afloat. If Wells Fargo raises your minimum payment as a result of the closure and it is more than you can afford, we recommend reaching out to them directly to work out a payment plan that works for you.
- Use your cash to build your credit. With Credit Sesame, you can now use your cash to establish and build credit quickly—and you get rewarded with cash when your score goes up.2 Customers with early access to the new offering improved their credit scores by as many as 71 points in as little as two months.1
- Avoid closing other credit accounts. As mentioned above, closing credit accounts can impact your credit age and utilization. Unless necessary, avoid closing other accounts to help keep the negative impact to your score at a minimum.
- Closely monitor your credit score. It’s important to keep a close eye on your credit score to see how you will be affected or flag any errors. You can check your score for free at Credit Sesame, and we’ll provide you with more personalized tips for how you can continue to improve your score.