Many of us get them in the mail, sometimes on a daily basis, often several at a time. The vast majority end up in the trash can, usually unopened. They come from companies we know and may have an account with; and from others we've never heard of.
I'm talking about "prescreened" (also called "preapproved") offers of credit. The most common products marketed in this manner are credit cards, but other loan products and even insurance policies are sold this way. Most prescreened solicitations come via mail, but you may also get them in a phone call or e-mail.
People have asked me how they got on the mailing lists for these offers of credit. They also want to know what impact the offers may have on their credit records.
Preapproved offers of credit are based on information in your credit report that indicates you meet criteria established by the lender. The criteria may include how long you've had credit, the types of credit (car loan, credit card, mortgage and so forth), how many accounts you have open at the present time, the outstanding balances, and certainly your payment record. The lender may also require that you have a credit score above a certain level.
The lender may provide the list of prospects for its product to the credit reporting agency to be prescreened against the established criteria. The list could be existing customers of the lender or members of an organization it partners with; or a list the lender purchased. Rather than provide its own list, the lender may simply establish the criteria and ask the credit reporting agency to provide names of people in its files who meet them. In return for being able to screen you for credit that you haven't applied for, the lender can only turn you down if you accept the offer under very limited circumstances.
When you apply for credit and a lender pulls your credit report, an "inquiry" is recorded in the file. Lenders tend to get worried if they see too many inquiries because that may indicate you're about to become over-indebted. Inquiries from prescreened offers, however, don't negatively impact your credit score or record.
You can opt out of receiving prescreened offers that are based on lists from the major credit reporting agencies for five years or permanently. To opt out for five years, call (888) 5-OPT-OUT (888-567-8688) or go to optoutprescreen.com. The phone number and website are operated by the major credit reporting agencies, including Equifax, TransUnion and Experian. You can also begin the permanent opt-out process by visiting the website, but you'll ultimately have to return a signed Permanent Opt-Out Election form that will be provided to you.
As you consider opting out to reduce clutter in your mailbox, you should know that some prescreened offers may include benefits that you can't get otherwise or that aren't offered to the general public.
Opting out won't stop solicitations that are based on lists from sources other than the credit reporting agencies, such as professional and alumni associations. It also has no effect on your ability to apply for or obtain credit and you can always opt back in at a later date.
Randy Hutchinson is president and CEO of the Better Business Bureau of the Mid-South. Contact him at firstname.lastname@example.org.
Reprinted with permission from The Commercial Appeal.