When Wells Fargo announced earlier this year that it was ending all its consumer credit line offerings, the financial world was shocked. Not only did the move include the cancellation of all existing credit lines rather than grandfathering in support for them, it happened with very little prelude and took effect quickly. The result was the nearly instantaneous decrease in credit score for hundreds of thousands, if not millions, of Americans with Wells Fargo credit lines. Coming on the wake of years of investigations and settlements related to fraudulent practices on the part of the bank, the intentions behind the change have come into question by analysts all over the political and economic spectrum.
Why Did Closing Credit Lines Lower Scores?
The long-term maintenance of revolving credit lines contributes to a high credit score on an ongoing basis, even if they are rarely used. Maintaining a low average balance on an open line shows responsibility with money and a tendency to pay back debt quickly. All three of the major consumer credit reporting bureaus advise against closing open credit lines even if they are not needed. This is because closing the line has a negative impact on one’s score under the existing formula whether it is paid entirely or converted to another loan. In addition to that, converting a credit line to a loan generates a new unsecured debt on the customer’s record, which also causes a minor credit dip.
How To Raise Your Credit Post-Closure
Whether you were affected by the Wells Fargo credit lines announcement or you’re facing a credit line closure for other reasons, there are a few concrete steps you can take to raise your credit score afterward. Some are ongoing processes you’ll need to build the discipline to maintain, others are short-term steps you can take to get a momentary boost.
1. Stop Checking Your Score
Running a credit report is viewed as a query that could lead to another debt line by the credit reporting formulas in use this generation. That means when you pull your score with a detailed report, you’re temporarily lowering the score. How much it goes down depends on how many recent queries there have been and what your score looked like before. If you need to track down debts or to check on the impact of losing Wells Fargo credit lines, get a detailed report to work from, then leave it alone until you’ve finished paying off any that you were unaware of. Checking a few months before you apply for new credit is a good idea, but constantly monitoring your score can be tough on it.
2. Pay Off Small Items
Past-due medical bills and some other forms of collections can appear on your credit report for years after you lose track of them. In some cases, the report is how consumers learn there was even a debt in the first place. This can happen when you are sick and recovering. Deadlines for bill payment simply slip by in the chaos, leading to a collections referral that could take months or even years to come back around. After pulling one detailed report, track down and pay off any smaller items that were off your radar. Then start working on smaller debts like vehicle loans and small credit lines, if you have any.
3. Open a Credit Line or New Card
Credit cards and consumer credit lines are great for building credit, and Wells Fargo is hardly the only game in town. Many credit unions and most other national banking chains offer options for consumers with decent scores, and all it takes to build a positive score is a withdrawal and quick, full repayment a few times. Replacing Wells Fargo credit lines with offerings from another bank could take some time if your score took a big hit. A few months of steady payment on your other existing debt obligations should reverse it, otherwise, a new line and a little activity can raise a score that has only taken a moderate reduction.
4. Consider Using Tradelines To Enhance Your Credit
Adding tradelines to your credit score can repair damage done by the closing of Wells Fargo credit lines. It’s also a good solution for rehabbing a score after other events you have no control over. So what is a tradeline? Simply put, it’s a credit card line and the activity on it that is posted to your credit report. New trade lines for existing cards with positive payment records can be obtained by adding you as an authorized user to another person’s credit account. If you have a friend or family member capable of helping you out, it is often done by parents for children or by siblings to help one another out after a credit mishap.
You can also partner with a person who has an existing credit line and a good credit score by using Coast Tradelines to match with someone who can help you raise your credit by adding you to an account. To learn more, contact a company representative today.