Closing a Fraudulent Wells Fargo Account Could Hurt Your Credit Score

October 5, 2016, Written By Bill Hardekopf
Closing a Fraudulent Wells Fargo Account Could Hurt Your Credit Score

If you were one of the 500,000 people who had fake credit cards opened during the Wells Fargo scandal, you may want to hold off on canceling your fraudulent credit card. As twisted as it sounds, getting rid of a credit card you never asked for could lower your credit score.

Wells Fargo opened accounts for more than two million customers without their knowledge. 25% of those were credit cards, while the others were checking and savings accounts. The checking and savings accounts will not have an impact on your credit score, but closing the credit cards will. In fact, adding the unwanted credit card account could have actually raised your score when it first got created.

Credit scores depend on a variety of factors, including credit history, length of credit lines and on-time payments. One key factor is the debt to available credit ratio. The new line of credit Wells Fargo opened increased the amount of available credit in your name, thus making your debt ratio more appealing. For instance, if you had $1,000 in credit card debt and $3,000 in available credit, your debt ratio was 33%. If Wells Fargo’s fraudulent credit card account had a $2,000 limit, your available credit was raised to $5,000 and your debt ratio decreases to 20%.

If you cancel your new, unwanted credit card, you risk lowering your credit score. It will bounce back over time, so it may not be an issue if you are not looking for a loan or a new card any time soon. However, if you are currently shopping for a low-interest mortgage loan or a car loan, you may want to keep the card in your name until you’ve completed that loan process.

As long as there are no fees associated with the new card, there isn’t much harm done, other than the annoyance of having a line of credit opened without your permission. If your new card does have fees, assess whether the slight drop in your credit score is worth cancelling the card at this time, or if it would be better to wait a little longer.

If you do close your account, there are certain steps that you need to take in order to document this properly.

The information contained within this article was accurate as of October 5, 2016. For up-to-date
information on any of the terms, cards or offers mentioned above, visit the issuer's website.

About Bill Hardekopf

Bill Hardekopf is the CEO of and covers the credit card industry from all perspectives. Bill has been involved with personal finance for over 15 years. He is a frequent contributor to Forbes, The Street and The Christian Science Monitor.
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