Reserve Line of Credit opened up by mistake/deceitful practice

[Anonymous]

My mom went into open a bank account and was tricked into opening up a Reserve Line of Credit (CL: $3000) for "overdraft protection." They did not mention to her that this was based on her credit and that it would show up on her credit reports. They just told her that if she ever made any transactions that they would be covered by the bank and she'd "avoid the fees."

She doesn't want the reserve credit and neither do I since she'll be a cosigner on my student loans in about a year's time. This account will drop her average age of credit account, thus potentially lowering her score.

I've contacted the bank, but they've said that "since she signed the papers" it's essentially her problem (they can close the account for us, but won't provide us a letter that states it was opened in bank error so that we can get it removed from the CRAs). It's been less than a week and I'm trying to figure out what I should do to get the account closed per request of the bank and not by the end user.

Any help is appreciated.

[llecs]

Are you certain it is hurting?

Certainly adding a new TL, like a LOC in her case, can drop your scores because of the new credit. IME, I've lost about 20 points on average with each new TL, but certainly YMMV and most don't lose that many. In any case, most of the points should return inside of 6 months with the remaining by a year. Also, FICO reads whole number years only for AAoA (e.g. 2 yrs, 3, 4, 5, etc.). While there's a chance it can drop a whole year, it doesn't always drop your score. YMMV based on your credit. If she has a lot of open and closed OC TLs reporting, then this really wouldn't be a concern.

Another impact could be the inquiry, but IMO, inquiry damage is overrated.

Next, her mix of credit could be impacted, though only for the better. If she only has a card or two, then expect a bump in score, or at least enough points to wash out any damage due to the new TL. If she has a solid mix of credit, then ignore this.

Finally, utilization could be impacted. If she has $0 balances reporting on her CRs across the board, then adding a $3k LOC won't have any impact. However, if she's carrying any sort of balance on her CRs, then she might see a gain when this reports as her overall util goes down.

She would have to decide if you want it closed. Consider the above. If she still wants to cancel, then do so out of principle, but if she signed the agreement, then it'll be a challenge to get removed. I wouldn't dispute though as it would get verified. I'd go through the bank only.

[Red1Blue]

Scores will come backup again. Why are you worried about scores ? Unless you are looking for new credit or mortgage in the near future, I would not worry too much about the scores. In few months scores will go back up again. It is good to have a LOC any way in case if it is needed at some point in the future. My advice, relax and dont loose too much sleep over this.

[marty56]

I love CU's but even mine required me to op-out of overdraft protection, even when I didn't have it prior to a law change awhile back.  Also be careful of debt cards and ATMs.  It used to be the case that if you wsnted to withdraw say $100 and only had $80, it would allow withdrawl and automatically do an overdraft - with a fee of course.  I don;t know if that still happens or not. 

[Anonymous]

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@Anonymous wrote:

My mom went into open a bank account and was tricked into opening up a Reserve Line of Credit (CL: $3000) for "overdraft protection." They did not mention to her that this was based on her credit and that it would show up on her credit reports. They just told her that if she ever made any transactions that they would be covered by the bank and she'd "avoid the fees."

She doesn't want the reserve credit and neither do I since she'll be a cosigner on my student loans in about a year's time. This account will drop her average age of credit account, thus potentially lowering her score.

I've contacted the bank, but they've said that "since she signed the papers" it's essentially her problem (they can close the account for us, but won't provide us a letter that states it was opened in bank error so that we can get it removed from the CRAs). It's been less than a week and I'm trying to figure out what I should do to get the account closed per request of the bank and not by the end user.

Any help is appreciated.

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As others have stated, I probably would not worry about an additional inquiry or the new tradeline causing damage to her credit score.  Personally, I believe an overdraft LOC is a good thing -- but that's just me.

As for bank error, the bank is probably right.  She signed the agreement and disclosures so is stuck with the effect of that decision.  You might though try going up the chain of command and writing, say, the bank CEO and ask for a little help.  Other than counting on their goodwill, I don't see any other option.