Wells Fargo gives up closing personal lines of credit

A month after the Wells Fargo WFC,
+ 0.36%
announced its decision to close customers’ existing personal lines of credit, the bank has changed course and will leave the lines open.

The company began notifying customers of the update by email and post on Tuesday, according to an emailed statement from Wells Fargo.

No new personal lines of credit will be opened – this decision was made over a year ago – but existing lines of credit will still be managed.

Comments from customers who did not want their lines of credit closed prompted the cancellation, a spokesperson said.

“We have heard feedback from customers and that feedback is very important to us,” the emailed statement read.

When Wells Fargo announced the closures, the company warned customers that their credit scores could be affected, prompting backlash on social media, including a tweet from Democratic Senator Elizabeth Warren of Massachusetts calling Wells Fargo to “do things right”.

Your available credit compared to the amount you use is a big factor determining your credit score, the elimination of a credit line could therefore weigh heavily in this calculation.

What customers should do

If you have an active Wells Fargo personal line of credit, you don’t need to do anything. If you haven’t already, the company will notify you that your account will remain open and you can continue to use it.

Customers whose accounts have been inactive for a year or more will either need to use the line of credit to show account activity, or contact Wells Fargo by November 30 to keep it open. Otherwise, the company will close inactive accounts on December 2, the spokesperson said. These customers will receive a separate email and letter in the post with instructions.

Don’t miss: Chocolate, champagne, wine, steak, travel discounts – some of the perks of being a shareholder

Customers who closed their line of credit in response to the bank’s previous announcement and wish to reopen it should contact the company.

Compare borrowing options

Among your unsecured borrowing options, personal lines of credit are the rarest – some banks still offer them, but they’re not as common as credit cards and personal loans. If you’ve already closed your Wells Fargo account, it might be time to shop around before you reopen it.

As with a personal line of credit, you don’t need collateral or a reason to get a personal loan or credit card. The big differentiator between the latter two is their repayment structure. Compare these options to decide what is best for your projects.

Also see: Is a Travel Rewards Credit Card Right for You?

Credit cards offer flexibility similar to a personal line of credit, and they can come with rewards and work well for regular daily or monthly expenses. Just make sure you can pay off the balance each month to avoid paying interest.

Personal loans are structured as a line of credit in repayment. You borrow the money in a lump sum and pay it back in fixed monthly installments. Personal loans also allow you prequalified to see the interest rate and monthly payments you’re eligible for, without affecting your credit score.

More from NerdWallet

Annie Millerbernd writes for NerdWallet. Email: [email protected]

Source link

Previous Mindtree shares have jumped nearly 30% in one month. Should we still keep or buy?
Next Best of times, worst of times: saving, borrowing, investing and taxing in a stormy economy