Pre-Approved Credit Offers and What they Can Mean for Your Credit
It’s not an uncommon scenario: You go to the mailbox and find tucked in between the electric bill and a magazine subscription renewal notice an envelope that says you’ve been “pre-approved” or “pre-screened” for a new credit card. What do those offers really mean? And what affect might they have on your credit?
When you receive this type of offer – whether it comes via mail, email or a phone call – it means a credit information company has reviewed your credit file and given your information to the offering company as someone who could qualify for their offer. The credit card issuer then includes you in a direct mail campaign. The offer, however, doesn’t mean you’re automatically approved for the line of credit. You may find the offer is an appealing one that provides some credit advantage. In that case, you’ll need to submit an application to take advantage of the offer. Once you complete the application, the card issuer will review your application and take a closer look at your credit file.
Pre-approved credit offers don’t affect your credit because they are “soft hits” on your credit report. Such inquiries aren’t factored into credit scoring calculations and appear on your credit report only for a relatively brief time. If, however, you do decide to apply for the line of credit, the company’s full review of your credit file will appear as a “hard hit.” Too many hard hits in a short amount of time can affect your credit scores. Keep in mind that acquiring new credit changes your utilization ratio of credit available to credit used, another factor that can impact your scores.
While pre-approved credit offers don’t affect your credit report or scores, if an offer envelope is stolen from your mailbox, the offer could be used to commit identity theft. You can choose to stop pre-approved credit offers for a period of five years, or permanently. To halt offers for five years, call 1-888-5-OPT-OUT (1-888-567-8688) or go to www.optoutprescreen.com. To opt out permanently, log on to www.optoutprescreen.com to begin the process. You’ll have to sign a form to complete the process.
Whether you decide pre-approved credit offers are helpful to you, or that you don’t need them, understanding their relationship to your credit can help you make more informed decisions about how you use your credit.