Does Opt-Out Pre-Screen Raise Your Credit Score?

Although the Credit Card Accountability Act of 2009 made pre-approved credit card offers illegal, a loophole allowed lenders to mail 47 million offers for pre-approved business accounts in the first three months of 2010, according to The Wall Street Journal. Consumers can stop most pre-approved mailings by signing up for Opt-Out Pre-screen, and doing so may help protect their identities and credit ratings.

Identification

Opt-Out Pre-screen takes consumers off the mailing lists of members of the Direct Marketing Association, which sends out most pre-approved mailings. However, pre-approved credit offers do not affect consumer credit ratings, because the inquiry does not cause damage like a request for credit by the consumer. Also, creditors cannot see how many pre-approved offers a consumer receives, so Opt-Out Pre-screen has no direct effect on the creditworthiness of consumers.

Considerations

When a consumer accepts a pre-approved credit offer, the lender performs another credit check to ensure the consumer meets the lender's borrowing standards. This counts as a hard inquiry, which takes up to five points off a credit rating. Any successive credit inquiries cause more damage, and six or more inquiries become a significant negative event in a credit history, according to the Fair Isaac Corp., which calculates the FICO score.

Identity Theft

Pre-approved credit card mailings increase the odds of identity theft, which can ruin a consumer's credit rating at least until the individual proves fraudulent accounts to the credit reporting bureaus. A would-be thief can intercept pre-approved mailings, take out a new account and make fraudulent charges long before the consumer realizes the theft. Damage from identity can cause a low credit rating for several months until the consumer resolves the matter.

Tip

The initial opt-out only lasts for five years. If a consumer wants a permanent opt-out, he must request this in writing. The consumer may still receive pre-approved offers, so she should shred those and make sure nobody can piece the mailing back together to obtain sensitive personal information. However, the consumer should consider the benefits of pre-approved offers, too. For example, the mailing may give him a good gauge of reasonable terms on a credit card or offer credit on better terms than those available to the general public, according to the Federal Trade Commission.