Editorial Policy

7 things to know about pre-approved credit offers

Allie Johnson

September 25, 2015

You grab a stack of bills and junk mail from your mailbox and suddenly spot a credit card offer marked with a tantalizing word: pre-approved. But before you count on getting that card, here's what you need to know about these types of offers.

First, what is a pre-approved offer and what does it mean if you get one? A pre-approved offer is a piece of direct mail sent by credit card companies to a group of consumers who fit certain criteria, says Nick Clements, co-founder of the finance site MagnifyMoney.com.

Most direct-mail credit card offers, more than 70 percent, are prescreened, while the rest are general invitation-to-apply letters sent to people who haven't been screened, according to data from Mintel Comperemedia, a company that conducts market research on credit cards.

Prescreened offers usually, but not always, are targeted at consumers who have prime credit, says Andrew Davidson, senior vice president at Mintel Comperemedia. To decide who gets the offers, many banks purchase data from the major credit bureaus – TransUnion, Experian and Equifax – and sort it to pick the consumers who are both likely to respond to the offer and likely to get approved for a credit card, Clements says.

For example, a consumer with a credit score of 800 who has had only one rarely used card for the past two decades probably would get approved but would be unlikely to apply, Clements says. On the other hand, a consumer with scads of cards, piles of debt and a credit score of 600 might respond but probably wouldn't get approved.

“If you're receiving offers in your mailbox, you've passed both of the tests,” Clements says.

In that case, here are seven things you should know about direct mail from credit card companies:

  1. You're not guaranteed a card. Getting a prescreened offer doesn't mean you'll definitely get a card, Davidson says. That's because during the screening process banks can see information like your credit score but not other important facts, such as whether you have a job and how much you make. “Those are two really big questions if you're applying for credit,” Clements says. For example, a consumer with a credit score of 750 who has $50,000 in debt could look OK, until the credit card company finds out her annual salary is equal to her debt, Clements says. “That's a big warning to the credit card company,” he says.
  2. “A savvy consumer should always look for the best deals.”
    — Nick Clements,
    co-founder of the finance site MagnifyMoney.com

  3. Pre-approved doesn't mean approved. You might have been a great candidate when you got the offer, but the company will pull your credit again after you apply for a card. If something has changed in the interim – say, you ran out and applied for 10 new cards or missed a credit card payment, your application could get declined based on the new information, Clements says.
  4. Lack of mail doesn't mean you have no offer. The reason could be as simple as the bank not wanting to shell out for paper and postage. “Maybe they've just cut their marketing budget, so this quarter they're not going to mail to you,” Clements says.
  5. Responding to an offer might protect your score. If your credit score is iffy, such as around 700, it might make more sense to respond to an offer for which you're prequalified than to seek out cards to apply for on your own. That's because each application for credit could knock your score down by about 10 points, Clements says. So, applying and getting rejected multiple times can eat away at your score, diminishing your chances of getting a card each time. But if you've got a score of, say, 780 or higher, you've got a pretty good shot at getting any card you want. “Just go ahead and apply,” he says.
  6. Prescreened offers can bring juicy deals. Prescreened offers sometimes have excellent terms – possibly better than those available to the public, Clements says. In fact, about 85 percent of the prescreened offers sent so far in 2015 contain introductory interest rates, Davidson says. Most of those offers – eight out of 10 – contain combination introductory interest rates on both balance transfers and purchases, according to CreditCards.com's 2015 Balance Transfer Survey. And the most common introductory interest rate is 0 percent.
  7. You should still shop around. It's still best to compare all of your credit card options – taking note of the terms such as the introductory and purchase interest rates, Clements says. “A savvy consumer should always look for the best deals,” he says.
  8. Sick of offers? You can opt out. If you're annoyed by direct mail from credit card companies or worried that they expose you to the risk of fraud, you can stop getting offers either for five years or permanently, according to the Federal Trade Commission. The FTC offers a guide for stopping unsolicited mail and other marketing. To opt out for five years, you can call 1-800-5-OPT-OUT, or visit OptOutPreScreen.com. To opt out permanently, you can start the process online, but will have to fill out and return a signed form.

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