I have been a marketing professional for many years. I have worked on direct mail campaigns for various banking and retail companies offering an invitation to apply applications. Many offered pre-approved, prequalified, or pre-selected offers. These were all marketing terms designed to entice prospective customers to apply for a new credit card. They will most times offer various credit limits and terms. What does pre-approved for credit card offers mean? What does pre-qualified or pre-selected mean? Will I be guaranteed to receive this credit card at the credit limit and terms indicated in the envelope? Let’s jump in and see.
Can The Credit Bureau Sell Your Information?
Credit card companies spend a great deal of time, effort, and money to find the right customer to offer this financial product. The main source is to contact the credit bureaus: Experian, Transunion, and Equifax to obtain your credit information. Prior to 1970, credit bureaus were allowed to sell your actual credit score. However, in that year the Fair Credit Report Act (FCRA), Public Law 91-508, was passed by Congress. Its sole purpose was to promote the accuracy, fairness, and privacy of personal information in credit reports. However, It has been amended a few times.
Banking institutions and retail companies could no longer request your credit score for marketing purposes. Therefore, they had to work with compiled or aggregated data from Experian, Transunion, and Equifax. However, Under the law, credit bureaus and other credit reporting agencies can release your information only to those third parties that have certified that they have a purpose permitted by the law to obtain your consumer report, such as to evaluate your application for credit, insurance, or employment, or to rent you an apartment. Per Privacy Choices – SEC.gov.
Marketing Resources To Offer Credit Offers
Each of the major credit bureaus has over 200 million files. Credit reporting agencies can sell your personal information (including unlisted phone numbers, credit scores, current debt, debt history, property information, age, gender, and estimated income) to debt collectors and financial services companies.
Assumptions About Your Credit Score
Using inferred and geo-data a credit card company can make some assumptions. Based on where you live, and the average income of the location, this basic information can help them determine if you make the cut to receive their prescreened offers.
Preselected, prescreened, and Pre-qualified, offers are sometimes interchanged when referring to offers from credit card companies. This is totally different when referring to mortgages and will be a discussion for another time. They do not guarantee that you will be approved by Discover, American Express, or any other financial institution like Bank of America that is associated with a Visa or Mastercard.
Therefore, don’t be fooled by the marketing materials using this language you can still be declined. If your credit card information has not changed you have a good chance of being approved. However, a hard pull on your credit card application could indicate any number of red flags. Therefore, after the soft pull of your financial information, they can still decline you for income, housing costs, credit-to-debt ratio, etc. These red flags are items that may prevent you from meeting their financial hurdles. Hence, you should temper your expectations if you receive pre-qualified offers. Pre-approved is a stronger language that may mean you do qualify.
What Does Pre-Approved For Credit Card Offers Mean
Still Need To Apply For A Credit Card
There are many reasons why you may need more credit. You may need to apply for more credit to improve your credit score. Opening new accounts to create a different mix of credit goes a long way in helping with this. You may have maxed out your current credit card limits. Therefore, this is a great way to increase your utilization. Finally, you may just need to begin to establish credit for the first time. You must have credit in order to have a credit report.
To apply for credit the financial institution will need the following information:
- Address and the length of time at this resident.
- Date of birth
- Phone number
- Email address
- The digits of your social security number.
- Your place of employment and length of time employed.
- Total annual income.
- Your current credit report from one or more credit bureaus
The Preapproved Offer Mailing List
All credit bureaus maintain a credit profile on every person in their database. This compiled list is maintained for the purpose of lenders and other businesses to use for marketing purposes. This database is designed to increase the approval odds of those selected to be targeted. If you are currently receiving these offers, it is a good sign that your credit is in good standing. However, if you are selected make sure this is the best credit card offer for you. On the other hand, if you do not wish to receive this type of solicitation you have the option to opt out.
Can Equifax Sell My Data?
Per Equifax: Regulatory compliance. We collect, use, and sell personal data as part of our regulatory compliance products, which help customers comply with federal, state, and local laws and regulations. Debt recovery. We collect, use, and sell personal data as part of our debt recovery products. Opting Out of Equifax.com or 888-5-OPT-OUT
Can Transunion Sell My Data?
Per Transunion: You have the option of opting out of having Transunion sell your data to credit issuers. If you choose to opt out of the sale of data, this will include all information found in your data privacy disclosure. Opting Out – Transunion.com or 866-310-8783
Can Experian Sell My Data?
However, you can also make a phone call or write to each of the credit bureaus if you wish to opt out of any prescreen offers.
Credit Score Information
Your credit score is based on the following information. Each criterion affects your credit score in a different way.
- Payment history (35% of your score)
- Utilization (30% of your score)
- Length of credit history (15% of your score)
- New credit (10% of your score)
- Credit mix (10% of your score)
Having a history of making payments on time is the most important criterion for your credit score. Financial institutions want to make sure that when they loan you money you have a track record of making on-time payments.
Your utilization score determines if you can responsibly manage the credit, you have been granted. This is the second most important part of your credit score. Keeping your utilization under 10% should be your goal. If your credit line is $1000.00, 10% would be $100.00. As you increase your credit limit the amount you can use will continue to increase. Therefore, if you have multiple credit cards with a line of credit of about $50,000 you can spend up to $5,000 while maintaining a utilization of 10%. However, I caution you to avoid debt by only spending what you can comfortably pay off each month.
Length of Credit History
The length of credit history is basically, applying for a card and holding onto it for at least six months. This is the minimum amount of time needed to build a credit history used to calculate a credit score. There is no harm in keeping a card if you are happy with the value provided to you by the original card offers. I have had one of my credit cards since 1987 and it still meets my financial situation.
New Credit has one of the lowest impacts on your credit score, coming in at 10%. If you are looking to improve your utilization it may be a good idea to consider a new card. However, you can also request an increase in your credit limit from any of your existing credit card issuers. Before you start the credit card application process make sure you are a good candidate. Also, make sure you are getting a better deal. A hard credit inquiry will have a negative impact on your score. Read What Hurts Your Credit Score The Most for more details.
Finally, the credit mix makes up 10% of your Fico score. A credit mix means that you should have credit cards, auto loans, student loans, personal loans, and/or mortgage payments. As we began paying off our car notes and student loans our credit mix was down to just credit cards and our mortgage payments. Our credit score took a hit. We are still over 800 but it was a two-digit drop for me not sure how much my husband’s dropped. Nevertheless, we both still have excellent credit. Remember the credit bureaus will reward us for our variety of debt and will decrease our scores if our mix changes.
If you are looking for a new credit card, being on a list of potential customers for any financial institution goes a long way to improving your personal finances. However, beware of over-extending yourself. Also, the potential for credit card fraud should someone get a hold of your preapproval offers. They can open credit in your name and this is a real risk. Identity theft is a real possibility for the general public at large. Even the credit bureaus have not been able to prevent it from happening to them.
Finally, read the fine print for interest rates, an annual fee, late fees, etc. Check to see if there are any online tools to help you navigate the entire process. Many of the major issuers have prequalification tools you can use before presenting the official application.
Preapproved – After the credit score has been reviewed you are considered a good candidate for the credit card.
Pre-selected, Pre-Qualified, And Pre-screened – you may get approved with less appealing terms and after a full credit report review.
Invitation to Apply – No credit screening has been done so a small percentage on this list of people will be approved.
This editorial content is for informational purposes only.