3 Common Myths About Preapproved Credit Card Offers

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Is your mailbox inundated with “preapproved” credit card offers? You may consider it junk mail, but credit card issuers have a different mentality.

Credit card issuers pay the credit bureaus for the names and addresses of consumers who meet their desired profile for a customer — a practice commonly referred to as target marketing. From their perspective, it’s an effective way to connect with potential cardholders.

But don’t be tricked into believing that what you see is what you get. That may not be the case, depending on your credit profile.

Here are a few common myths about preapproved credit card offers that you should be aware of:

1. I’m automatically approved

Until your complete credit history is accessed and analyzed by the credit card issuer, an official approval will not be issued. The initial credit screening considers only a portion of the information needed to make a decision. Additional information, such as credit utilization ratios and recent applications for credit, may exclude you from meeting the qualification criteria.

Says MarketWatch:

… being a candidate doesn’t make you a winner: Odysseas Papadimitriou of CardHub.com … says the rejection rate for preselected applicants can reach as high as 30 percent, even among relatively affluent borrowers.

To completely grasp this idea, think about those high school students who apply to a number of institutions they appear to qualify for, only to receive a rejection letter when it’s all said and done.

In some instances, changes in your credit history after your inclusion on the preapproved offer list and before you actually apply can trigger a denial. For example, having a delinquent account that has been reported to the credit bureaus or maxing out a credit card can affect your eligibility for the new card.

However, you may still have a chance of obtaining the card, but with a higher interest rate or lower credit limit than what was advertised.

2. Preliminary screenings will damage my credit

That initial credit screening to determine whether you should receive a credit card offer is considered a soft inquiry, similar to when you pull your own credit report, and it has no bearing on your credit score.

on Credit Card Insider:

The bank sending you the conditional offer of credit has a rough idea of where your credit score may fall, but a full copy of your credit report has not actually been pulled and reviewed by the lender. Therefore, only a “soft inquiry” shows up on your credit reports anytime you receive a preapproved credit card offer. Soft credit inquiries do not hurt your credit scores.

However, if you apply for the card, a hard inquiry will result, which could have a negative effect on your credit score.

3. I’ll receive these offers forever

Under the Fair Credit Reporting Act, you have the option to prohibit the credit bureaus from including your contact information in lists provided to card issuers for five years or permanently.

To do so, simply visit www.optoutprescreen.com and select your preference. Once you have done so, you will be asked to enter your name, address, Social Security number and date of birth to verify your identity. The Federal Trade Commission provides more information about the process.

It may be in your best interest to exercise this option because it not only reduces the amount of junk mail you receive, but reduces your chances of being victimized by identity theft.“However, some companies send offers that are not based on prescreening, and your federal opt-out right will not stop those kinds of solicitations,” the FTC notes.

It’s also important to note that opting out may cause you to lose access to exclusive credit card offers that cannot be found online.

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Comments & discussion

We welcome your opinions, but let’s keep it civil. Like many businesses, we reserve the right to refuse service to anyone. In our case, that means those who communicate by name-calling, racism, using words designed to hurt others or generally acting like an uninformed bully. Also, comments that include links to email addresses or commercial websites typically aren't posted. This isn't a place to advertise your business.

  • pennyhammack

    These “offers” are a nuisance and many times have your information pre-printed on the application so simply throwing them away is not the answer. I bundle up all their propaganda and mark the application with “not interested, take me off your mailing list” with a Sharpie. I insert as much as I can in the prepaid envelope and return it to them. I believe this gets their attention better than the opt out services because they end up having to pay for the return postage without actually selling me a credit card.

  • http://www.creditunionguy.blogspot.com/ Credit Union Guy

    Generally, a financial institution or credit card issuer will ask for all the addresses with credit scores of, say, 680 or better in specific zip codes. The list may be used for up to 18 months or more. During that time, someone’s score could drop pretty dramatically if not managed well. That can certainly put a crimp in your pre-approval!