Pre-approved Credit: How to Avoid Credit Profiling
Just about everyone has received the offers in the mail: “You’re Pre-approved for a New Platinum Card!” or “0% Financing – Pre-approved!” Often, these offers come just at a time when you are making improvements to your credit score – either through a credit repair service, or through careful management of your debts and payments. Other times, these types of offers come when you are already in financial trouble – just after a bankruptcy, or when you are having trouble making payments on other obligations. And nearly every time, these offers contain terms that are all too-tempting until you take a look at the fine print and realize that the great offer comes with some heavy fees attached. Typically, these types of pre-approved offers come with annual fees, account maintenance fees, high interest, and no grace period for purchases. But for a person who isn’t credit savvy, the numbers in large font and bold type can seem too good to pass up.
Receiving offers for credit that you did not initiate is nothing new for most consumers. However, some people may be surprised to realize that this type of marketing is not limited to credit cards. People with troubled credit history, people just out of bankruptcy, and people who are shopping for a mortgage or to refinance are just a few of the broad demographics that data mining companies keep track of, and within these demographics, smaller subsets are often taken. Your personal information (name, address, financial profile, etc.) is then sold to various companies who use that information to market credit card offers, lines of credit, or even mortgage loans directly to you. Information about your household size, your debt-to-income ratio, or even the types of magazines you subscribe to can be included in these types of data mining schemes.
When you have problem credit, these types of offers can seem like a life-line, or vindication (“My credit score must be improving; I’m receiving offers for new credit cards!”) but more often than not, these offers are just another trap to weigh you down with more debt and financial obligations that you may not be able to meet. These institutions will have information on your income, housing status, family size, and other data that can be gleaned by combing through public records and other areas that you may not suspect. And they tailor their offers to provide themselves with the greatest potential for profit, usually to your detriment.
So how do you stop these unsolicited offers and maintain your privacy? On most of the offers you’ll receive, there is a toll-free number that you can call to tell companies that you don’t want your information sold to third parties. If you opt-out of these types of pre-screened offers when it comes to your credit, it will eliminate much of the problem. Be skeptical of any offer for credit that you did not initiate, especially if you’re shopping for a mortgage. Credit bureaus may flag your account and offer other banks a chance to market their options to you as well – in general, if you’ve got a good deal, stick with what you know. If you don’t have a deal you’re happy with, do your own shopping around. In this way, you are more likely to be fully informed of the financial decision you are about to make.
Offers of pre-approved credit can make you feel like you’re back on the right track again when it comes to improving your credit score, but the real test may well be your ability to say no to these types of offers and continue the smart financial habits that improved your score in the first place. Don’t let clever marketing tactics get you into trouble financially – always initiate your own inquiries for new credit, and avoid the pre-approved pitfalls.
