They know what it’s like. You go to your mailbox after a long day at work hoping for a surprise check for thousands of dollars. A refund from the IRS your accountant didn’t tell you was coming. Or perhaps an all-expenses paid trip (not associated with a timeshare) to a swanky desert island.
Instead, you’ll find a few invoices and a healthy stack of colored envelopes that say in very large print, “Congratulations! You have been pre-approved [or you have pre-qualified] “for something. This could be a credit card, home equity loan or other type of loan. You feel good in that someone would trust you with their money without ever meeting you, talking to you, or collecting any private financial information about you.
But let’s pause for a moment. Before you say “yes” to any of these offers, take a closer look.
It’s not a sure thing
“Pre-approved” doesn’t really mean much of anything. The company making the offer may have bought someone else’s mailing list or purchased a roster. From a credit agency or other institution – even a charity.
You’ve probably made a soft inquiry, aka a soft pull, on your financial situation. Soft pulls are inquiries about your credit that don’t affect your credit score. The company doesn’t want to waste money by sending the offer to people who ultimately don’t qualify. Therefore, they get basic information about ou without knowing you. But when you apply for the loan or credit card, the company will then send a hard inquiry or hard pull – the one that impacts your credit score. (For more on the difference between the two, see Credit Score: Hard vs Soft Inquiry ).
If you pull your credit and find out you don’t qualify, you don’t get the loan even though you were “pre-approved” or “pre-qualified”. ”
Better places to get credit
Personal finance experts have a saying:” If they come to you, there are probably better deals out there. ” If you’re in the market for a credit card or personal loan, conduct the search on your own. You can compare credit card offers online and find up-to-date lists of the best cards that meet your needs (for specific card-buying tips, see 7 Factors to Compare Credit Cards ).
If you’re looking for a personal loan, check with your bank or credit union first. In other words, stick with reputable sources you know and trust.
Of course, an unsolicited offer can also come from sources you know. In the case of credit cards, you often don’t have to worry about the legitimacy of the company because it’s huge and a household name (think MasterCard, American Express). But pre-approved loans are different. You don’t necessarily know the lending outfit, and that generally means it makes sense to steer clear.If you are curious, do some research on the company. If information is hard to come by, that’s a serious red flag.
Get off the lists
OK, you have decided that this offer is not for you. Don’t just throw the letter away. Open the envelope, remove anything with your name, address, or other identifying information, and place it in a shredder. Identity thieves can use information they find in the trash to open accounts in your name.
If you don’t want to receive the quotes at all, the Federal Trade Commission recommends you go to www. Optoutprescreen. Com. You can opt for five years or even permanently. When you finally unsubscribe, you must print a form from the website, sign it and return it (otherwise they will come back).
Even if you opt out, some prompts may sneak through. However, your number is greatly reduced.
The Bottom Line
You can certainly evaluate any offer you receive as part of your research to obtain credit cards or personal loans. But most of the time you should just say “no”.