Pre-approved credit card offers bring new accounts right to your mailbox. Banks pre-screen your demographic and financial information through the credit bureaus and send you credit card invitations that include tailored offers like low promotional interest rates or balance transfer offers. Such offers do not affect your credit score directly, but they can lead to several types of indirect harm.
Inquirires
Pre-approved credit card offers result from soft inquiries by credit card issuers. A soft inquiry is a credit check for marketing purposes or your own review of your credit reports. It has no effect on your credit score, and lenders do not see it when they check your reports. Hard inquiries result from actual credit applications, and these do lower your credit score, according to the MyFICO scoring company website.
Bad Effects
You add more available credit, and potentially more debt, to your credit reports and score when you accept a pre-approved offer. MyFICO explains that your owed balances are 30 percent of your total score, so getting a new card and spending most or all of the available credit, is bad for your financial records. You also hurt your credit if you accept a pre-approved card with better terms than an existing account, transfer the old balance, and close the original card. Your credit score favors accounts with longer histories, according to MSN Money writer Liz Pulliam Weston.
Warning
Pre approved credit card offers expose you to identity theft. Criminals steal offers from your mail, redeem them and max out the cards in your name. Then your Experian, Equifax and TransUnion credit files show a high balance and delinquent account, which pulls down your credit score until you catch and report the fraud.
Alternative
Your current credit card issuer might agree to lower your interest rate to match pre-screened offers if you do not wish to open a new account. Bankrate.com writer Lucy Lazarony explains that you can request a lower rate over the phone. Tell the customer service agent that you are considering a competitive offer and would like an adjustment on your current account so you do not have to move your business. You have a good chance of success if you have always paid the account on time.
Opt Out Process
The credit bureaus must stop selling your information to credit card issuers if you opt out of their marketing programs. The Federal Trade Commission explains that federal law requires the bureaus to run a website, optoutprescreen.com, which lets you halt pre-approved offers online or through a toll-free telephone number (see Resources). You may stop the offers permanently or for five years, with an option to renew.
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