In a sweeping move, Wells Fargo has decided to stop offering personal lines of credit. The company informed customers of this change in a letter. The letter stated that Wells Fargo won't be offering new lines and is also closing existing ones.
This type of revolving credit line has been around for years, and its closure could impact credit scores for consumers involved.
Why Wells Fargo is closing personal lines of credit
Wells Fargo says that it's moving away from revolving credit lines between $3,000 and $100,000, which have typically been used to consolidate debt, avoid overdraft fees, and pay for personal investments.
Instead, the company plans to focus on credit cards and personal loans. This means anyone with an existing personal line of credit at Wells Fargo can expect the bank to close it down.
The move comes just a year after the bank closed new home equity lines of credit and auto lending.
How the credit line closure will impact borrowers' credit scores
In a small section of the customer letter that Wells Fargo sent out, the company noted that closing personal lines of credit could impact borrowers' credit scores. Presumably, the company is referring to a negative impact.
U.S. Senator Elizabeth Warren of Massachusetts wrote on Twitter, "Not a single @WellsFargo customer should see their credit score suffer just because their bank is restructuring after years of scams and incompetence. Sending out a warning notice simply isn’t good enough – Wells Fargo needs to make this right."
Of course, Wells Fargo is a bank and not a credit agency. However, Wells Fargo does control the way in which it decided to close and could have let existing personal lines of credit phase out naturally.
Don't expect a review or reversal of your account closure
If the bank closed your line of credit, it won't be participating in any reviews or reversals of the move. This means that any closure is final, and you'll have to take it up with a new bank in order to receive your funding.
Ultimately, the move will close up to $24.9 billion in loans. Those with existing lines will have to comply with updated minimum payments as the accounts close out.
How to see if your credit score is impacted without dinging it
You can check your credit score for free annually from the three official credit reporting companies in the U.S. Find yours at annualcreditreport.com. Additional soft inquiries will temporarily ding your score. Consider giving your score a few months to adjust to the Wells Fargo change before checking so that you're sure to get the most updated metric.
If you want to try to recover your credit score quickly, tools like Perch Credit might be helpful. This Jay-Z-funded app factors in all of your subscriptions and recurring payments to help you build credit.
You will also need to change banks if you want to continue your personal line of credit for certain needs.