Opening up the mailbox one day might surprise you because several credit-card offers may be inside. Being told that you have the opportunity to open up these accounts is flattering, but you might wonder how lenders get this information in the first place. Creditors can access some of your information in order to advertise certain cards to the right consumers. However, your credit isn’t impacted when it comes to prescreened offers.
You’ve probably heard about “soft” and “hard” inquiries into your credit history. When you approve of a lender pulling your credit information to start an account, this process is called a hard inquiry. It does ding your credit, but it should recover with responsible spending, reports Experian.
A prescreened credit card comes from a soft inquiry. Credit companies learn about your good credit, and they send you something in the mail. Because you’re the only person who sees this offer, no impact to your credit occurs.
There’s a process called “opting out” that stops the credit-card offers from flying into your mailbox. Some consumers believe that opting out influences their credit score because no soft or hard inquiries are occurring. In reality, nothing happens to your score in either positive or negative ways. It remains stagnant because no activity is being reported.
Prescreened offers don’t hurt your credit, but responding to more than one at a time can be detrimental. Your credit score goes down if you open too many accounts at the same time. Spending too much of the offered credit at once will also impact your score. Ideally, you want two or three cards with low or nonexistent balances. Your credit score improves when lenders see that you have a lot of available credit without using too much of it.
Protecting Your Identity
It’s possible to opt out of prescreened offers for five years at a time, states the Federal Trade Commission. If you receive credit offers during this time period, however, be wary of the situation. Your identity might be compromised, and someone is using it to receive prescreened offers. Verify if your name is printed on the mail. Another name entirely may be on the envelope with your address. Protecting your identity is as simple as contacting the credit bureaus. These prescreened offers can actually help you at this point; you wouldn’t have known of the identity issue otherwise.
After bankruptcy, your credit is severely limited. You may be thrilled to receive any credit-card offer in the mail. Be careful about applying to any extra cards after going through bankruptcy. They don’t usually have the best, interest rates. By being careful about your finances, your credit score can creep upward with better offers in the future.