USA   |   UK   |   Australia   |   Canada
ADVERTISEMENT

Erroneous loan default report won't affect other credit accounts

CARD Act banned 'universal default' so you won't pay for others' mistakes

By

Let's Talk Credit
Let's Talk Credit columnist Jane E. McNamara
Jane E. McNamara is president and chief executive officer of GreenPath Debt Solutions, a nationwide, not-for-profit, providing financial literacy through consumer education and counseling for more than 50 years. For financial literacy tips and assistance visit GreenPath on Facebook or YouTube.
Ask a question.
'Let's Talk Credit' archive

Question for the CreditCards.com expert

Dear Let's Talk Credit,
I had perfect credit until a very large collection appeared out of nowhere. It's something I will be fighting with an attorney. The collection doesn't relate to anything I borrowed or any debt I was ever ordered to pay. Will my current creditors end up changing terms of my accounts as a result?  -- Sarah

Answer for the CreditCards.com expert

Dear Sarah,
Thankfully, an erroneous collection account report on your credit report will not have any negative effect on your other credit accounts. The ended the practice of universal default. Before the Credit CARD Act, card issuers could change the terms of your account based on late payment behavior on any of your other credit accounts. Card issuers can no longer change terms based on other account behavior.

In fact, a credit card issuer may not raise your interest rate for a late payment on its account, unless the payment is more than 60 days late. If you are 60 days late and do receive an interest rate increase, it must revert back to the original APR after you make six months of on-time payments.

Changes in terms that can still be made at the discretion of the card issuer are an increase in your minimum payment amount, a reduction in your credit limit and closing your account.

Any installment loans you may have, such as a car loan or mortgage, do not usually change terms unless there is a default on the loan. Otherwise, what is included in your credit report only affects the terms of those loans at the time they are originated.

It is a good idea to consult with an experienced attorney to resolve the issue of the large collection account. Your attorney will help you dispute the account, so that is removed from your credit report.

It is law that an account under dispute must be removed from your credit report until the dispute is resolved. However, you might consider postponing any plans that would require a third party to review your credit report, unless you know for sure that the collection account is no longer reported on your credit report. That would include searching for jobs, pricing or purchasing insurance, leasing an apartment or home and, of course, applying for any new credit.

Let's keep talking!

See related: New credit card era begins with latest CARD Act provisions, CARD Act prevents sudden rate hikes, not annual fees, 6 questions to ask about your company credit card

Meet CreditCards.com's reader Q&A experts
Vexed by a personal finance problem? CreditCards.com's Q&A experts answer questions from readers every weekday. Ask a question, or click on any expert to see their previous answers.
Gary Foreman, New Frugal You columnist Gary Foreman,
"New Frugal You"
Sally Herigstad, To Her Credit columnist Sally Herigstad,
"To Her Credit"
Tony Mecia, Cashing In columnist Tony Mecia,
"Cashing In"
Barry Paperno, Speaking of Credit columnist Barry Paperno,
"Speaking of Credit"
Elaine Pofeldt, Your Business Credit columnist Elaine Pofeldt,
"Your Business Credit"
Erica Sandberg, Opening Credits columnist Erica Sandberg,
"Opening Credits"

Published: January 16, 2014



Join the discussion

We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.

The editorial content on CreditCards.com is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.

Three most recent Lets Talk Credit stories:

Share This Story




Follow Us!


Credit Card Rate Report

Updated: 10-22-2014

National Average 15.07%
Low Interest 10.37%
Business 12.80%
Balance Transfer 12.82%
Student 13.14%
Cash Back 14.98%
Reward 15.05%
Airline 15.46%
Bad Credit 22.73%
Instant Approval 28.00%

ADVERTISEMENT
ADVERTISEMENT