How Credit Scores Are Used for Credit Card Prescreening

Credit card companies are constantly trying to find new, qualified customers. In fact, credit card issuers in the United States mail out billions of offer letters every year in an attempt to entice consumers to apply for their cards. Many of these offers are strategically sent only to consumers whose credit reports and scores indicate that they are likely to qualify for the card. These letters are known as “preapproved offers of credit.”

How It Works

In order for a credit card issuer to mail you a preapproved offer of credit the issuer must first gather some information from one of the credit reporting agencies (Equifax, TransUnion, or Experian) in order to determine whether or not you would be likely to qualify for the card. There’s no point in mailing an offer to a consumer who’s simply going to be denied when he or she actually fills out the application. So, card issuers want to be more strategic and thoughtful about the process and the credit reporting agencies have services designed to help them.

When a card issuer contacts one of the credit reporting agencies (or “CRAS”) they will provide them with a very specific set of selection criteria. For example, ABC Bank might contact Equifax and request a list of consumers living in Chicago with a minimum credit score of 680 and no history of a bankruptcy on their credit report. Selection criteria is much more detailed than the example above. In fact, a card issuer’s true selection criteria for a specific card offer could be several pages long.

Sometimes the list of consumers who meet a card issuer’s selection criteria is too long. In other words, the card issuer might only want to mail out 1 million preapproved offers but the list of eligible consumers, based upon the selection criteria, is 3 million. When this occurs the card issuer will make a final cut and determine how many preapproved offers to actually send out. For example, the card issuer might send an offer to every 3rd consumer on the CRA’s list in order to whittle down the list to a manageable number.

If you make the final cut you can expect a credit card solicitation to arrive in your mailbox shortly thereafter. Additionally, a record of the access into your credit history, known as an inquiry, will appear on your credit report. These types of inquiries are known as “soft inquiries” or even more specifically “promotional inquiries.” Promotional inquiries have no impact on your credit scores whatsoever.

Opting Out of Credit Card Prescreening

Many consumers dislike the idea of their credit reports and scores being accessed without their permission. If you fall into this camp and would like to prevent your credit reports and scores from being access for promotional purposes then, thanks to the Fair Credit Reporting Act, you have the right to do so at no cost.

Any consumer who wishes to stop receiving preapproved offers of credit can visit the website www.OptOutPrescreen.com. When you visit the site you will have the option to opt out online for a period of 5 years or you can print out and mail in a form to opt out forever. If you ever change your mind and begin to miss the piles of credit card offers cluttering your mailbox you can always change your mind and opt back in.

The Myth

There is a rather popular credit myth, one of those myths which refuses to die in fact, that leads people to believe that opting out will somehow raise their credit scores. This is completely false. Credit scoring models do not consider whether or not you have opted out as a factor in determining your credit scores.