It’s very hard to ignore a pre-approved credit card offer when it shows up in your mailbox. These offers fill up your mailbox as lenders compete to catch your attention and earn your business. But as transparent as these offers may seem, there’s a lot that goes on behind the surface. Here are some things you should know about the pre-approved offers that show up in your mailbox.
They Don’t Hurt Your Credit
Whenever you apply for a line of credit, the lender will have to check your score to see if you qualify. That inquiry into your credit will cause a temporary decrease in your credit score.
Pre-approved offers involve no such inquiries into your credit report. The “pre-approved” part of the invitation simply means that your approval is subject to conditions – an actual check into your credit report.
Credit card companies purchase lists of consumers with good to excellent credit from credit reporting agencies. These lists are built based on a soft inquiry into consumers’ credit reports, and they don’t hurt your score until you apply for the card.
You Still Might Get Rejected
Since the lender didn’t pull your credit report before mailing the offer, you’re not really pre-approved as the envelope claims. If you decide to accept the offer and apply for the credit card, there’s no guarantee that you’ll be approved for the card.
Your actual credit report determines whether you’ll get approved or not. In fact, a large number of people are denied credit after submitting their applications because a lot can change after the credit reporting agency generates the list.
The approval rate is especially low for pre-approved offers targeted towards people with bad credit. This is because their credit can sink further in 3-6 months.
But if you have good credit and receive a lot of offers for balance transfers and rewards cards, there’s an excellent chance that the company will approve your application. People with good credit rarely do things to mess up their credit.
Some companies won’t reject you outright, but they might change the terms of lending. If you check the offer, you’ll find a list of interest rates and credit limits for which you’re approved. However, the lender will determine the actual values based on your credit score.
If you’re not satisfied with the terms of your new card, you can always cancel the card. But that could be detrimental to your credit score. The hard inquiry will hurt your score, but you’ll also forfeit the benefit of an improved credit utilization that you’ll get from having another card.
Before you cancel the card, call the customer service line and let them know you’ll cancel the card if you don’t get better terms.
Shred The Offer If You’re Not Going To Send It In
Since the offer won’t include critical financial data, you’re probably safe from identity theft. Anyone rummaging through your mailbox or trash won’t have sufficient information to submit the application in your name. But a regular household guest with dishonorable intentions could probably dig up the missing information, submit the application, and wreck your spotless credit history.
Don’t think it cannot happen to you. Victims of identity theft often admit that they should have been more careful with their financial information and credit. And since there’s a growing trend of identity theft among family members, it’s better to be safe than sorry. This could perhaps be why there has been an increase in applications for online credit cards.
You Can Opt Out of Getting Them
Your first pre-approved offer may have been an exciting prospect, but it gets bothersome after a few more offers.
If you’re tired of receiving pre-approved offers in the mail, you can opt out and reduce the flow. As long as the mail has your name and address and contains adverts and catalogs you didn’t request, you can use the Mail Preference Service (MPS) and you’ll be taken off the Direct Mail marketing list.
The service is free, and it takes about 4 months before it’s fully activated, but after that time you’ll receive fewer offers in the mail.
However, if you’re thinking about getting another credit card in the next few months, you might not want to suspend the offers as some of the best deals are sent through the mail.
On average, only 30% of credit card applications are approved when consumers go about the application through normal channels. However, pre-approved offers increase your chances of getting approved -so don’t ignore them if you want to improve your chances of getting a credit card.
Crystal Redhead-Gould knows that there are many different kinds of credit card available to choose from when you are looking for a new card. Check out the uSwitch.com website for more information about applying for a new card.