Concerned Wells Fargo customers ask whether the bank or credit accounts opened without their permission will hurt their credit rating. More specifically, some are concerned whether these fraudulent accounts will prevent them from buying a home.
This situation with Wells Fargo is a wake-up call for all consumers. People who are rebuilding their credit after filing bankruptcy are particularly vulnerable.
Before we discuss potential damage to customers, we need to consider the circumstances that led Wells Fargo employees to open these fraudulent bank and credit accounts.
Why some consumers have Wells Fargo accounts they did not open
Wells Fargo employees used customers’ personal and financial information to open new checking, savings, and credit accounts so they could reach performance goals. At the time, Wells Fargo’s goal was for each customer household to have eight products or accounts through Wells Fargo.
The Consumer Financial Protection Bureau levied a record-high $185 million fine against Wells Fargo. Employees opened an estimated 2 million fake accounts to receive sales bonuses. The Consumer Financial Protection Bureau said some of the illegally opened 565,000 credit card accounts resulted in annual fees, interest charged and finance charges. Since the cardholders did not know about these accounts, these unknown charged damaged credit ratings.
How false accounts could affect credit rating
These false accounts were not connected to Wells Fargo’s mortgage department. However, customers’ credit ratings may suffer as the result of these additional credit lines.
According to the National Association of Consumer Advocates, credit rating damage from an account you didn’t open might disqualify you from a desirable mortgage or refinancing loan for any of the following reasons:
- Average account age lowers making an overall history look newer.
- Unknown fees, fines, and interest may result in missed payments and overdrawn accounts that appear as negative information in credit history reports.
- Multiple credit queries in a smart amount of time can harm FICO scores. Since the consumers did not know about the Wells Fargo credit card applications that were a risk.
Your credit rating influences loan eligibility, interest rates, and refinancing options. This is especially damaging for consumers who are rebuilding their credit after job losses, foreclosures, filing bankruptcy, or financial difficulties.
What you can do to protect your credit rating
Consumers may request a free credit report each year. Review your report to ensure all accounts are those you opened. Some customers discovered credit accounts through reviewing their credit report. However, this may not expose banking accounts opened by Wells Fargo employees.
If you do have Wells Fargo accounts that you didn’t open, consider your options. In some cases, keeping an account open may be better for your credit rating, in other situations, it may be best to close the account. Contact Wells Fargo and request they correct any errors, fraudulent accounts and repay any fees.
If you need legal assistance, seek legal counsel from a qualified attorney who understands complicated financial, credit, and legal issues.