Universal default is defined as the process where a lender changes a loan agreement from the current terms to the default terms. Lenders have the power to do this when they’re informed about a customer defaulting with another lender. Currently a controversial topic in the credit industry, universal default is a practice that every person with established credit should be familiar with.
Universal default is becoming more prevalent ever year. Most people aren’t aware of it, but most card issuers follow their account holders closely every month — every single card that the customer has. If one of your credit card companies sees that you’re late on a payment with a different credit card company, they have the ability to raise your interest rate. Not surprisingly, this tends to shock a lot of people, from first-time credit card holders to veterans in the world of credit.
But will continuous account reviews affect your credit score?
Luckily, numerous account reviews, with the intention of discovering information on other accounts or not, will never affect your credit score. When potential lenders pull up your credit report, they will only see the inquiries made on applications for a new credit card, loan, or mortgage. If it looks like you’re taking on too many obligations, these types of applications can greatly affect your credit score.
In order to avoid universal default and ensure the best rates, consistently pay your credit bills on time each month. Consumers who are responsible when it comes to paying back loans tend to the ones with the best credit scores. For more suggestions on how to improve your credit and join that elite group, click here.
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