Wells Fargo closes personal lines of credit, affects some customers’ creditworthiness
ATLANTA – Wells Fargo management announced that it will close all personal credit lines.
The lender admits that this will affect the creditworthiness of some customers.
A line of credit is an approved amount of credit that you can draw on when you need it – by paying back what you borrow on a monthly basis – up to the agreed line of credit. These loans are often used for financial emergencies.
Wells Fargo told Fox Business that it is simplifying its offerings by removing personal lines of credit while continuing to offer personal loans and credit cards. The bank admitted in a letter that this can be inconvenient “if the creditworthiness of customers could be compromised”.
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This is how it works: Customers receive a letter with a 60-day notification that their account has been closed. When the 60 days are up, the loan will be closed. However, you must repay the loan with your minimum monthly payment. The loan that you are repaying will be converted from floating rate to fixed rate.
How does this affect your creditworthiness? Well, credit scores are a combination of a few things, but two biggies are your debt-to-credit ratio and your credit history.
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By closing a loan that ends its story. That’s a thing. And if, for example, you had a $ 10,000 line of credit and only used $ 1,000 of it, that looks good. When that line of credit is gone and you owe $ 1,000, you are using 100 percent of the available credit. That is also a thing.
Lines of credit are often used for emergencies, debt consolidations, or home renovations. Other sources of finance are a personal loan or a home equity line of credit.
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