Universal Default

Universal Default is a provision provided in the terms and conditions by several credit card companies that allows the creditors to review your credit report on a regular basis. If your credit score has been negatively impacted for some reason, the credit card company will apply a new higher interest rate to your card.

Here are a few instances in which the credit card company can and will apply the Universal Default clause:
-If you have been delinquent on a single debt payment, such as another credit card, a utility bill or your monthly car payment
-If you have gone over one of your credit limits on a credit card, even a card that is not the creditors own
-If you are carrying too much debt, such as your DTI (Debt-to-Income) ratio has risen
-If you are using more than 50% of your line amount on any one credit card
-If you have too many open credit accounts
-If you have too many credit inquiries
-If you have received a new mortgage or auto loan

Any one of these above factors may trigger the Universal Default Rate in your open credit card accounts. The Universal Default clause was meant to protect the credit card companies from risk, but it is affecting consumers on a much higher level.

Consumers are stuck with a higher rate on their credit cards because of some very minuet triggers on their credit report. The credit card companies are benefiting from this clause substantially. Most consumers are unaware of this clause and may not even know that a higher payment of their monthly credit card bills is going mostly to interest. Their debt is slowly rising, not falling and their credit will be affected in the long run.

To avoid this disaster, make sure you pay all your monthly bills on time. Approximately 45% of credit card companies carry this provision in their terms and conditions. Read the terms and conditions of your credit cards carefully to see if you are under this threat.

If your current credit card companies do have the Universal Default provision, make plans to exit the credit facility. Check to be sure they have not switched your interest rate to a higher one. Look for zero-percent offers in which you can transfer your balance.

The Universal Default Rate will affect your credit. Make sure your credit companies are not apart of this provision. Avoid applying for new credit cards that do carry this provision. It’s as simple as that. Continue your good credit score and avoid the small print!