Why Am I Getting These Offers?
Once you have begun to establish credit you may notice a barrage of “pre-approved” credit card offers flooding your mailbox. Once your name is out there “in the system” your name, address and some credit info may be shared to “affiliates”. This practice is usually spelled out in the fine print of a lending agreement or a sign-up form. This is usually why people get these offers so often.
Maybe, you went a step further. You called the credit card company up out of interest or curiosity. Sure, they offered you a high credit limit and no interest for the first year! In many cases this doesn’t turn out to be the case. Quite often, these pre-approved offers are a way to fish you into agreeing to different terms. They may offer you a higher interest rate and a lower balance than was advertised in the initial offer. For someone just establishing credit, with minimal accounts being reported, this may not be the worst idea. But, this begs the question: “How are they able to do this to people?”
Bought and Sold
Believe it or not, your information may be bought and sold between credit card companies and, yes, the credit bureaus themselves. As was explained earlier, they get around the legalities by unwittingly having consumers agree to have this practice done. The fine print is so… well… fine because there are clauses buried in it that you might not be so quick to agree to.
As a consumer, however, you have the right to opt out of this practice. There is the Fair Credit Reporting Act which give you the ability to cross your name off the lists that credit bureaus sell and share to lenders and card issuers. This act includes strict guidelines that credit bureaus and lenders must follow when doing business. It protects consumers from fraudulent and criminal practices performed by these institutions. If you wish not to have your information shared and sold you can visit www.optoutprescreen.com to limit the amount of offers you receive.
What You Should Know
These pre-screened or pre-approved offers have no effect on your credit unless you pursue them. The companies issuing these offers have not run a full credit report on you. They have meerly requested a list of potential clients that meet a specific criteria. Take for example: Discover gets a list from Experian (a major credit bureau) of individuals with credit scores below 680. This criteria meets the type of people they want to issue credit cards to. Speculatively, they are looking for people with less than perfect credit who they can get to agree to a higher interest rate. This results in more profit on their part.
The credit card company does not “pull” your full credit report until you ask them to upon the actual request for approval. This type of credit pull will have an initial negative impact on your credit score. It is in your best interest to limit the amount of these offers you pursue to avoid any unnecessary damage to you credit.
You Are Not Alone
Millions of Americans are tempted into agreeing to these offers every day. Remember that “pre-approved” is usually a ruse that leads to a lesser deal than is offered up front. Know your rights as a consumer. If you feel you are being preyed upon you can make an effort to limit these offers by opting out. Before entering into an agreement with a credit card issuer remember to read the terms and the fine print. Certain key aspects to look out for are interest rate, annual fee and processing fee.
We, as consumers, are entitled to fair treatment from creditors and credit bureaus. Read up on consumer rights on the FTC’s website. Keep coming back to Dean Myerow Finance for more information about personal finance, credit, debt and more.