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Pre-Approved Credit Card Offers

"Congratulations. You have been pre-approved for a credit card."

"Low interest rate."

"Credit limit of up to $100,000."

Attached to the letter is a short application with some fine print on the front and back.

But what does it really mean?

Credit card issuers are constantly seeking out new customers to replace those who leave and to sustain growth. With the combined costs of advertising and application processing, establishing new accounts can be rather expensive. The "acquisition cost" can reach as high as $200 or more per account. Response rates for direct mail tend to be very low. It is common for less than 3% of the recipients to complete and return the application.

Rather than simply mailing credit card offers to everyone with an address, banks try to target their mailings towards consumers who are more likely to respond, qualify for a card, and become profitable customers. When preparing for a mail solicitation campaign, a card issuer may send a set of minimum standards to one of the credit bureaus (Equifax, Experian, or Trans Union), and request a list of consumers whose credit reports meet the qualifications. The bank may send a list of consumers obtained elsewhere (e.g. from a marketing database company) and have the bureau return a subgroup that matches the criteria. "Pre-approved" offers are then sent to everyone on the list, and may arrive in the consumer's mailboxes as long as two months after the credit bureau screening.

If you have a copy of your credit report, you may see inquiries that are designated as "promotional." This means that your file was checked for a "pre-approved" list, although it does not necessarily mean that you qualified to receive an offer. Since this type of inquiry was not initiated by you, it is not seen by other prospective creditors to whom you might apply, and will not reduce your FICO credit score.

Some sub-prime issuers actually use this type of screening to look for with moderately damaged credit, who are more likely to be willing to pay the high interest, fees, and/or deposits required by such issuers.

When a consumer completes the application and returns it, it goes to a processing center (which may be owned by a separate company from the issuer) where the data is entered into a computer system which then does a credit check on that specific individual. This is to determine if anything in the consumer's credit file has changed for the worse since the original sweep, and the qualification criteria may be higher. This credit check (not the original one) is used for final approval or rejection of the application. Sometimes fairly subtle changes in the consumer's file (like total available credit or balance-to-limit ratio) since the pre-screening can result in a rejection.

Final approval is also dependent on your application information (e.g. income) meeting issuers standards, so if this is insufficient, you will be declined.

Oddly, some "pre-approved" mailing lists from high-standard "prime" issuers sometimes include people who have no credit history at all, and will certainly be declined.

A "pre-approved" credit card offer does not mean that you will definitely receive a card. When an interest rate is promised as being "as low as" a certain amount, that is not a guarantee of that rate. And "up to" a certain credit limit does not necessarily mean that it will be anywhere near that. (Average starting limits for gold and platinum cards are well under ten thousand dollars.)

Some people do not wish to receive pre-approved credit card offers. They may object to direct mail, or lack interest in obtaining more cards (or any cards at all), or may have privacy or security concerns. If this includes you, then you can call the following number to request that the credit bureaus not include your file in any pre-approved/promotional sweeps:

1 (888) 567-8688

You will be required to give the automated system some identifying information. A two-year block can be requested over the phone, or you can obtain instructions for a permanent block. You can reverse this at any time.

To be thorough, you can also contact each credit bureau directly at addresses and telephone numbers specifically set up for opting out of pre-approval screening:

Equifax Options
P.O. Box 7401243
Atlanta, GA 30374-0123

1 (800) 556-4711

P.O. Box 919
Allen, TX 75013

1 (800) 682-7654


Experian Consumer Opt Out
701 Experian Parkway
Allen, TX 75013

1 (800) 353 0809

Trans Union
Attn: Marketing Opt-Out
P.O. Box 97328
Jackson, MS 39288-7328

1 (800) 680-7293

The bureaus supposedly share opt-out requests, so theoretically you only have to contact one. But we tend to be very careful and thorough, so if we were inclined to opt-out, we would send written requests to all of them.


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