ATLANTA - Wells Fargo management announced it will close all personal lines of credit.
The lender admits this will impact the credit rating of some customers.
A line of credit is an approved borrowing amount that you can draw from whenever you need it — paying what you borrow back monthly — up to the agreed-upon line of credit. These loans are often used for financial emergencies.
Wells Fargo told Fox Business that it’s simplifying its offerings by eliminating personal lines of credit, while still offering personal loans and credit cards. The bank in a letter admitted that this can be inconvenient "when customer credit may be impacted."
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Here’s how it will work: Customers get a letter that serves as a 60-day notice that the account is closing. When the 60 days are up, the loan is closed. You will, though, have to pay back the loan with your monthly minimum payment. The loan that you are repaying will switch from variable interest to fixed rate.
So how does this affect your credit? Well, credit scores are a combination of a few things, but two biggies are your debt-to-credit ratio and your length of credit history.
By shutting down a loan that ends its history. That’s a ding. And, if say, 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 then you’re using 100 percent of what’s available. That’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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