To Cancel or Not to Cancel: What to Do if Wells Fargo Opened a Fraudulent Credit Card Account in Your Name

Closing the account may hurt your credit score even if you weren't the one who opened it

To Cancel or Not to Cancel: What to Do if Wells Fargo Opened a Fraudulent Credit Card Account in Your Name
Image: Pixabay
October 3, 2016

Were you one of the millions of people for whom Wells Fargo opened a fraudulent bank or credit card account?

If so, you may be intending to close the account, especially if the account is for a credit card. However, you may want to reconsider: closing any credit card account—even if you were not the one who opened it in the first place—can damage your credit score. If you do not know what the damage will be, it might be a good idea to wait until you figure it out.

According to Diane Moogalian, vice president of customer operations at Equifax, the act of closing a credit card account that does not have a balance will reduce how much credit is available to the consumer. This, she says, can weigh against the consumer.

"Lenders and creditors want to see that a consumer is able to make a financial commitment and honor it – over time," Moogalian told ConsumerAffairs. "In other words, that ability to show responsibility can take time, and sometimes keeping an account open can be a good thing."

However, consumers who do not want the card will probably suffer less damage by closing the card if its credit limit is low, which is likely in the case of most of the fraudulent accounts. Closing these accounts would not damage credit availability by too much.

According to Moogalian, consumers should also consider closing accounts without balances if those accounts are costing them money. If the choice is between spending money unnecessarily and having a credit score decrease temporarily, the choice should be to not spend money needlessly.

The amount by which a credit score will be affected by the closure of a credit card will vary according to how much credit a consumer has, how much he or she has used, and how good that credit is.

For example, if a consumer has a credit limit of $20,000 on all of his cards but has balances totaling only $4,000, his credit utilization rate is low. In this case, closing a credit account that reduces his limit by only about $1,000 will make little difference, particularly if his credit score is already good.

For those whose credit scores are already good, the damage they will experience by closing their Wells Fargo account should be relatively little and short-lived. Their scores should bounce back quickly as long as consumers continue to pay their bills on time and do not try to open a new credit line any time soon.