Maintaining your credit history can be difficult. Trying to keep down your interest rates could be a full time job. Of course, many folks instead of doing research on which credit card issuers are offering the best rates have become dependent on prescreened, pre-approved credit offers for guidance. But what do you really know about how those offers are developed and why creditors like them so much?
Before you read further, here’s a warning: reading this article may cause you to lose that adorable consumer fantasy - my creditors are my friend.
Advantages to consumers
Targeting potential consumers by controlling certain risks creates lower expenses and losses for the creditor, which, in theory, lowers cost of credit for consumers.
Additionally, because prescreening spurs competition and lowers creditor solicitation costs, it again, in theory, results in lower prices for consumers.
Reading this article may cause
you to lose that ‘my creditors
are my friend’ consumer fantasy.
Four areas of concern for consumers in regard to prescreened offers
- inconvenience
- debt burden
- privacy implications
- identity theft potential
Inconvenience
Inconvenience probably receives the lowest level of concern by regulators, Credit Reporting Agencies (CRAs) and creditors, although this may not be the case for consumers.
Apparently, how many of these mailings you receive, how you dispose of unwanted mailings (known on the street as junk mail) and the time it takes is your problem, not theirs.
Debt burden
Information made available from studies reported to the Federal Reserve seems somewhat contradictory.
While these studies and reports suggest that prescreened credit solicitations have not caused a large section of the public to obtain excessive amounts of debt, it is readily admitted that there are numerous individuals that have fallen into such a predicament.
Results from a Credit Advisors Foundation break room poll indicates that of those who have credit cards, nearly 70% received their cards through prescreened, preapproved credit offers.
This raises a level of curiosity of how many consumers in DMPs received their credit through consumer initiated applications as opposed to prescreened offers.
More recently, solicitation response rate trends reflect greater participation in balance transfer offers than in additional credit accounts.
One questionable study assumption to note however as there is no backup data provided is that prescreened offers would not in and of themselves contribute to overindebtedness as a consumer with debt problems resulting in payment difficulties would probably not receive such an offer. Another interesting assumption from reviewed surveys is that study participants did not believe they personally had too much credit due to prescreened solicitations but that the majority suspected that other consumers had fallen into the prescreened trap.
Prescreened credit offers
can cause concerns for
consumers including
inconvenience,
debt burden,
privacy implications,
and identity theft.
Privacy implications
Just how much access does a creditor have to your information stored by a CRA during the prescreen process?
Those involved claim the information is minimal.
A creditor contacting a CRA will provide certain criteria to create a solicitation list, such as a minimum or credit score range.
While the creditor would not receive information on the consumer’s actual credit score, they would know that the consumer does meet the prescribed parameters.
The creditor would also receive the consumer’s name and address, and information to verify the identity of the consumer that is not unique to the consumer (the example often given is that of a partial social security number).
Creditors may share this information with affiliated third parties so long as the consumer is given the opportunity to opt out.
Identity Theft
It doesn’t require Sherlock Holmes to find a connection between prescreened credit solicitations and potential identity theft.
More than one creditor has acknowledged that identity theft resulting from prescreened offers is generally found to be a family member, relative or person in a position of trust to the consumer.
Unfortunately, even though the ID theft does not involve a stranger, the damage done to the consumer both emotionally and to their credit record is the same if not greater and requires the same time and diligence to resolve regardless of the culprit - if the thief is ever identified.
For that reason, experts recommend that you not leave delivered mail in your mailbox any longer than necessary unless it is locked. They also recommend that you shred or in some fashion destroy unwanted credit solicitations you receive.
Maintaining your credit history and protecting your identity is already difficult enough. Being forced into managing prescreened credit offer mailings, from the clutter created to the safe and responsible disposal, may not be the best use of your time.
Remember, you can choose to opt-out.
Opting out requires that you contact the credit bureaus and request that you not be included in the criteria guided searches for creditors.
If you choose to opt-out there are a couple of different ways to go about it: On the web at www.optoutprescreen.com or by phone at (888) 567-8688.
When you opt-out you can choose to do so for five years or permanently.
If you are in a debt management program, a time when you are not to obtain new credit, you might consider opting out for five years to remove the temptation of additional credit and the headache of dealing with the solicitations.
