Personal Finance

Do Pre-Approved Credit Card Offers Hurt Your Credit Score?

| by PhilipTirone

What should you do about those pre-approved card credit offers that arrive in the mail? Sure, they entice you with low interest rates, an amazing new credit limit, or other special benefits. But will they impact your credit card score?

Keep in the mind the following points before you send away for these alluring credit offers.

The 1st Thing You Need to Know About Pre-Approved Card Credit Offers

Credit card companies usually obtain your information by paying credit-scoring bureaus (directly or through a marketing firm) to provide a list of consumers who meet certain criteria. If you are the recipient of one of these pre-approved offers, you may see the words “promotional” and “pre-approved” listed on your credit report. Some people may be swayed by the idea of being pre-approved, but a pre-approved credit card does not mean that you will even be guaranteed to obtain a card. The fine print likely tells you that final approval is determined by your application information.

The 2nd Thing You Need to Know About Pre-Approved Card Credit Offers

Be sure you consider how these offers will build your credit score (or hurt it). A pre-approved card sent to you will not affect your credit score. Credit inquiries made by credit card companies to determine your candidacy for pre-approved offers are considered “soft” and will not be included in your credit score. However, if you decide to sign up for one of these credit cards, you will be subjected to a real credit check, or a “hard” inquiry, and this will cause your credit score to take a slight dip as approximately 10 percent of your credit score consists of the number of hard inquiries you have listed on your credit report.

The 3rd Thing You Need to Know About Pre-Approved Card Credit Offers

Always read the fine print before you choose to open a pre-approved card. Though you may be persuaded by deals such as zero interest for a year on new purchases, the offers are rarely as straightforward as they seem. The language of some of the offers may not really match the reality of the credit card terms. For example, while an offer might boast “interest rates as low as two percent,” you might not fall into the category of people who receive this rate.

The 4th Thing You Need to Know About Pre-Approved Card Credit Offers

If you are considering applying for a loan to make a large purchase—such as a car—within the next year, you should probably avoid signing up for a new credit card. A new credit card can negatively affect your credit score in a few different ways. First, your credit score will decrease when the credit card company checks into your credit score. In addition, 15 percent of your credit score is determined by the age of your credit accounts, and old age means a better credit score. Opening a new credit account will drive down the average age of your credit accounts, reducing your credit score. Lastly, if you have too many credit cards you may see your credit score drop.

The 5th Thing You Need to Know About Pre-Approved Card Credit Offers

Pre-approved credit cards may also put you at risk for identity theft. A common way for identity thieves to establish a credit account in your name is to intercept your mail and respond to a credit card offer in your name. As a result, your credit might be severely tarnished and worrying about excessive credit scores or too many credit checks will be the least of your troubles.

Because of this threat, the best way to deal with pre-approved credit cards could be to opt out from all offers. You can opt out by sending a letter to one of the three credit scoring bureaus and ask to be removed from their lists, or you can call (888) 567-8688 and ask to be removed from all credit card offers.

Either way, be sure you are taking the best credit monitoring practices into consideration to protect your credit card score.

A final note about pre-approved card credit offers: To find the right pre-approved card for your needs, your best bet is to search for a credit card yourself, trying to find the attractive offers on your own and shopping around for the best deal. Avoid signing up for the first offer you; instead, take a look at your other options. Just because something arrives at your door doesn’t mean you should put it in your wallet.