What’s the Deal With Those Credit Pre-Approval Offers That Come in the Mail?
Have you ever opened your mail and been greeted with the envelope that gleefully declares that you have been “pre-approved” for a credit offer? Maybe you don’t have very good credit and the offer seems like it’s too good to be true. But it does say that you were prescreened, so apparently, they reviewed you before sending you the offer. All you have to do is reply and you’re guaranteed to get credit!
Why You Get These Mailers
Well, not so fast. There’s a reason why someone with not very good credit is getting an offer like this. Legally, the credit reporting agencies (Equifax, Experian or Transunion) are allowed to disclose certain information about you to advertisers who request it. And they get a lot of requests—if you’re a creditor, where better to go for a mailing list than the credit reporting agencies (CRAs)?
The magic word “prescreened” on the ads is legally allowed to be used, but it doesn’t mean that you have “prequalified” for the credit offer. It just means that you have met certain parameters set by the company requesting information from the CRAs—for example, age, income level or geographic location.
In fact, the Fair Credit Reporting Act generally prohibits a creditor from getting your credit history before it makes you an offer (once you respond to the solicitation, of course, they can then get your credit to see if you do in fact qualify).
Advertisers are required only to have two numbers set: The first, for who will receive the mailers—usually, a pretty low credit score to make sure as many people receive it as possible—and a separate number, which is the credit score of people who will qualify for the offer when and if they respond to the advertisement.
The Dangers of Applying
Of course, in your glee over the offer, you may think, “what the heck—let me apply since they liked me enough to send me this mailer.” But when you do respond, the credit pull that will happen afterwards to see if you actually qualify is a “hard pull” that can negatively affect your credit score.
Another way that advertisers can get you in this scheme is by qualifying you for credit, as the advertisement promised—just not at the rates promised on the mailer. So, for example, an advertiser can request from the CRAs contact information for everyone in Miami with a credit score of 550 and higher. Everyone will get the same mailer, except those with credit scores of, say, 550-600 will receive a higher interest rate than that which is on the advertisement, should they apply.
Other banks use this scheme to prey on those with bad credit by purposely obtaining and “prequalifying” people with poor credit at exorbitantly high interest rates, or rates that may adjust over time.
Note that you do have the option of “opting out” of these offers if you decide that magical unsolicited credit offers that come through the mail are too good to be true.
Is your credit being used or pulled improperly? Contact Jacobs Legal in Miami today to discuss your credit and the rights you have to protect this information from others.