The Fair Credit Reporting Act gives lenders and insurance companies the right to check your credit to see if you qualify for their credit offers. This is referred to as pre-screening, and it's important to know how it affects your credit.
Effects
When an insurance company or lender pre-screens your credit, this is called a soft inquiry, according to Bankrate. It will appear on your credit report but will not hurt your credit score since you did not apply for credit. The company simply looks at your credit to see if you pre-qualify for any of its offers.
Warning
If you receive a pre-screened offer of credit, that's simply a preliminary step. Once you accept the offer, the company will then check your credit again to see if you still meet the conditions of the offer. This is a hard inquiry since you're applying for credit. It will place an inquiry on your report, which could cause your score to drop by a small amount, according to MyFico. However, FICO only considers inquiries made within the last 12 months when calculating your credit score.
Prevention/Solution
If you'd rather not receive pre-screened offers, you can opt out. The credit bureaus have jointly established a website that allows consumers to remove their names from pre-screened offers either for five years or permanently. You can opt out at optoutprescreen.com.
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