What’s a Universal Default Clause and How Does it Affect My Credit Score? - Episode #20

The Universal Default Clause and how it impacts your credit score is important. Let’s break this down. The word “universal” clearly implies some kind of wide scoping impact and here it means that your actions on one credit card can impact the policies on another card. What this does, at least for some folks, is accelerate the decline in their credit score. How?

Say you have two credit cards, Card A and Card B and you make the minimum payments on both but you miss a couple or you are late on Card A. Now, even if the interest rate on Card A stays unchanged, the card issuer of Card B gets this information on lates from your credit file and can use increase your rate on Card B. This makes it harder and harder for you to climb out of debt, and likely in this scenario, unless you find a way to pay down balances, your credit score will decline.

How can you stop this? If you are applying for new cards, check out the fine print before you agree to terms. According to Wikipedia, Citibank removed use of the universal default clause in 2007, but you will have to check with other credit card issuers to see their most up to date policy.

Remember, if you are married, you might have joint or authorized user accounts, so you have to remember to look at all of your cards to see if the universal default clause is impacting you.

ID Theft Treatment for Victims - Lesson #8

In this lesson we are going to discuss ID theft treatment or what to do if you become a victim with ID theft.

We talked to someone the other day that thought he was victimized and he gave us his story

First off, he saw something on his credit file he simply couldn’t recognize and he had a credit report from his lender he was having trouble deciphering it. I know you want to save money, but the reports at myFICO, Equifax, TrueCredit and the other consumer websites are just easier to read.

He appeared to have a credit line or card that he didn’t recognize and he couldn’t easily tell. In his case the line item was an $18K credit line with $4K used. He really had no idea where he should start.

So here’s a good checklist of what to do

1. Place a 90-day fraud alert on your credit file, by contacting any of the 3 bureaus. It’s free and it’s easy. Again, you don’t need to contact all 3 bureaus. Once, 1 knows they tell the other 2. To set this up call any of the 3 bureaus, Equifax’s number is 1-800-685-1111 — select option 4. Or go to www.equifax.com.

2. Ok, now you need an Identity Theft Report, which you can get by contacting the local authorities. What is this? An Identity theft Report is simply a police report that contains details of the ID theft. You need this report to dispute any fraudulent account behavior on your report.

3. Contact your financial institutions by phone AND by certified mail to file an existing account dispute and/or a new account dispute. The FTC has nice forms for this, and you can get them from our website as well under resources. Include your Identity Theft Report with your dispute letters.

As an alternative, instead of using the FTC forms you can ask the representative to send you the company’s fraud dispute forms.

Send copies of these letters to the credit bureaus as well.

The companies have 15 days to ask for more info, and then 15 more days to ensure your Identity Theft Report contains everything they need.

4. Send follow up letters to the credit bureaus detailing status with Credit/Financial Institution companies. While the bureaus should get an update anyway from the Credit Card Company, it’s a good idea to follow up on your own.

5. Consider a 7-year alert or a Freeze on your account. More on this in Lesson 9.

6. Report the crime to the FTC

Ok, those are the major steps. Expect some back and forth on this. While the average ID theft resolution time is on the decline - it’s still a hefty chunk of time at 28 hours, so dig in and attack it.

If you are in the military…
When you are away from your usual duty station, you can place an active duty alert on your three credit reports as an extra protection against identity theft. The alert remains on your credit reports for 12 months. Contact the fraud departments for the three credit bureaus.

Wow, this is still a lot of work. Why bother? Well most people don’t report their fraud and that’s risky. For one, the Credit Bureaus are likely to think a new credit line is YOURS not FRAUD. So, your score will be on the hook.

Join us for Lesson 9 Where we will Discuss 90 day Fraud Alerts, 7-yr fraud alerts and Credit Freezes.

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