Dear Let's Talk Credit,
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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?
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!