July 12, 2021
Deciding to focus on its credit cards and personal loans, Wells Fargo has decided to stop offering personal lines of credit, CNBC reports. The bank announced the change in a six-page letter to its customers, giving them a 60-day notice.
In a statement to CNBC, a Wells Fargo spokesperson gave the reason for this change: “In an effort to simplify our product offerings, we’ve made the decision to no longer offer personal lines of credit as we feel we can better meet the borrowing needs of our customers through credit card and personal loan products.”
The move angered many Wells Fargo clients because it has the potential to negatively affect their credit scores. When the accounts get closed, their utilization rate, length of credit history, and the number of accounts will be affected, and, for some, this means that their credit score will drop. The more accounts and the higher utilization rate you have, the bigger the chances that your credit score will be negatively affected.
Personal lines of credit work similarly to loans and credit cards in that they offer a certain amount of money that borrowers can tap into at any time. A maximum loan amount is established, and the borrower must not exceed it. Lines of credit are often used to consolidate debt or to get quick additional funds for house renovations, a big purchase, etc. Their advantage is their flexibility but they can also come with high interest rates.
Did Coronavirus Hit Wells Fargo Hard?
The impact of the COVID-19 pandemic hasn’t been easy for anyone, banks included. Difficult decisions had to be made during the past year, as Wells Fargo was forced to offload assets and abandon some products.
Last year, the bank stopped offering new home equity lines of credit and loans for independent car dealerships, whereas, before the pandemic, it was focused on growing its auto lending operations.
Although Wells Fargo has abandoned quite a few projects, it’s still focused on improving its existing ones. For example, a few months ago, a pilot program was announced that facilitates the approval of credit cards for individuals with no credit history. The program is backed by large banks, including JPMorgan Chase, U.S. Bancorp, and Wells Fargo.
For now, Wells Fargo is still holding up to its good reputation. By eliminating some projects, it can focus on improving its existing ones, such as its credit cards, which are a popular choice among young adults. Wells Fargo is also one of the banks that don’t use ChexSystems, making it an attractive option for those with a bad credit report.