ATLANTA – Wells Fargo management has announced it will close all personal lines of credit.
The lender admits that this will affect the credit rating of some customers.
A line of credit is an approved amount of borrowing that you can withdraw whenever you need – paying off what you borrow monthly – up to the agreed upon line of credit. These loans are often used for financial emergencies.
Wells Fargo told Fox Business it is simplifying its offerings by eliminating personal lines of credit, while offering personal loans and credit cards. The bank admitted in a letter that it can be embarrassing “when customer credit can be impacted”.
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Here’s how it will work: Customers receive a letter giving them 60 days notice of the account being closed. When the 60 days are up, the loan is closed. You will however have to repay the loan with your minimum monthly payment. The loan you repay will go from a variable interest rate to a fixed rate.
So how does this affect your credit? Well, credit scores are a combination of many things, but two important things are your debt to credit ratio and the length of your credit history.
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By closing a loan that puts an end to its history. It’s a hit. And if, for example, you had a $ 10,000 line of credit and only used $ 1,000 of it, that looks good. If that line of credit is gone and you owe $ 1,000, you’re using 100% of what’s available. It’s a ding, too.
Lines of credit are often used for emergencies, debt consolidation or home renovations. Other financial sources include a personal loan or a home equity line of credit.
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