Prescreened Credit Card Offers and Your Credit
Your credit reports and scores are probably used for a lot more purposes than you even realize. Sure, you almost certainly are well aware that lenders generally check your credit reports and scores whenever you apply for a loan or a new credit card account. Sometimes 1 credit report and score may be checked and other times (such as when you apply for a mortgage loan) a lender may wish to view all 3 of your credit reports and scores at once.
You may already know that your credit reports (not scores) are routinely reviewed by employers whenever you apply for a new job or promotion. In fact, your insurance company probably even checked your credit report and your insurance risk credit score whenever you initially applied for home or auto insurance coverage. What you may not have known prior to this moment, however, is that your credit is often used to evaluate and judge you in many other circumstances as well – sometimes when you have not even initiated the request.
Credit card companies are always on the hunt for qualified new customers. If your income and credit can satisfy a card issuers’ qualification standards, they want you as a customer. As a result, one of the most frequent ways which credit scores and reports are used in the United States is for prescreened credit card offers.
Have you ever opened your mailbox to discover a pile of “preapproved” credit card letters inside? If so then chances are high that some of your credit information was accessed without your knowledge or permission and, like it or not, that access was most likely completely legal. The 3 major credit reporting agencies (Equifax, TransUnion, and Experian) are permitted under the Fair Credit Reporting Act (FCRA) to sell lenders mailing lists of consumers who meet certain credit standards.
Here is how the prescreening process works. A credit card issuer might notify a credit reporting agency that it wants to advertise new credit card products and desires to purchase a mailing list of consumers who meet a predetermined list credit selection criteria. The desired list could, for example, include 2 million people who live within the greater Chicago area. The card issuer only wants to advertise to consumers who have credit scores over 700, who have no public records present on their credit reports, and who have made zero late payments on any of their credit obligations within the past 24 months.
In order to legally purchase this information from a credit reporting agency the “catch” is that everyone on these mailing lists must be sent a “firm offer of credit or insurance” by that lender. Actual credit reports are not released to the lenders; however, if you are on a prescreened list they will have a very good understanding of your credit history based upon the search criteria provided.
Most, though certainly not all, credit checks are either consumer initiated (i.e. you check your own credit reports, you apply for a loan, you apply for a credit card, you apply for insurance coverage) or at least consumer approved (i.e. you authorize and employer to view your credit). However, the sale of a portion of your credit information for prescreening purposes is neither consumer initiated nor consumer approved. As mentioned above, the FCRA permits the credit reporting agencies (CRAs) to sell this information without the necessity of your approval or permission.
The FCRA does require, however, that you must be notified after the fact if your credit information was accessed by a third party. The credit reporting agencies satisfy this notification requirement by placing an “inquiry” on your credit report. Although you may be aggravated that your credit information was accessed, you can at least be comforted by the fact that these promotional inquiries are what is known as “soft.” Soft inquiries will, thankfully, have not have any negative impact upon your credit scores.
Even though having your credit pulled for prescreening will not harm your credit scores, the fact that your credit information may be bought and sold without your permission is understandably upsetting to many consumers. If you fall into this camp and believe that you should have more control over who is permitted access to your credit information then there is good news. The FCRA gives you an out. Specifically you can visit OptOutPrescreen.com if you wish to prevent your credit reports from being bought and sold for prospecting purposes in the future.
When you visit OptOutPrescreen.com you will be given 2 different options. First, you can elect to easily opt out online for a period of 5 years, after which time your credit reports will once again be fair game. You will have to repeat the online opt-out process again if you wish to remove your name from any future CRA mailing lists. The website offers you a second option to opt out permanently as well, but you will be required to print out and mail in a form to exercise that right. Finally, if you change your mind you can always opt back in at a later date anytime you wish.
Will Opting Out Improve Your Credit Scores?
There is a rather stubborn credit myth which exists with regard to opting out. This myth incorrectly leads consumers to believe that opting out will improve credit scores. The truth, however, is that opting out will not impact your credit scores in any way whatsoever – for the positive or the negative. There is no information on your credit report which indicates whether or not you have opted out and, therefore, it would be impossible for any credit scoring model to consider.
You should opt out if you wish to stop your information from being sold and even perhaps to reduce your potential exposure to identity theft (think of all the potential credit card offers circulating with your name on them). However, you should not opt out because you are chasing a quick boost to your credit scores or you will unfortunately be disappointed.