The purpose with the pre approved cards is completely different than you might think. In an era where banks and financial institutions battle daily to increase their cut of the consumer credit market, you may think credit flows easily and freely to the public.
Although the junk mail promotions seem to be saying “come one, come all” the real truth and goal is to encourage the highest possible number of people to apply for a new credit card.
Do Not Apply For Every Offer!
The letters sent out are pre-approvals sent to those people the credit rating agencies identify as like to apply and be approved. The “pre” in pre-approval means exactly what it says. When you make an application, the lender then pulls your credit score.
That is why it is so dangerous for you to apply for every offer that comes in your mail. Each time a lender pulls your credit score it alerts the ratings bureau that you are asking for a credit line. Too many requests and you could be flagged as someone with economical problems.
Reading the offers that come in your mail is a good way to watch trends in the credit card market and will keep you up to date on what new cards might meet your needs. Then again, you may be confused by the competing offers or give in to temptation to acquire as many credit cards as you can.
There may be some risk of identity theft in these blanket mailings but that is only if you are filling them out and sending them in by mail. If you throw away these offers it’s a good idea to shred them first.
Though the information on the application isn’t enough to steal your identity, those offers label you as a person worthy of getting credit and can make you to a lucrative target.
Reflect Over What You Are Doing
Before you fill out the form that came in the mail today that is offering you a new credit card if you just sign the form and send it back, consider what is actually happening.
You are authorizing the company that sent the form to officially request your credit score. Pre-approved does not mean “approved”. If you are denied your credit file will show that you applied for a credit account and were turned down.
These mailings go out by the tens of thousands and consumers who don’t understand the process may feel someone did pick them personally for a credit card. Believing they have been invited to apply they can seriously damage their credit scores by filling out application after application.
Do Not Either Forget…
One last thing you should watch out for is the name of the bank offering you the pre approved cards. Ask yourself whether it is a major bank or financial company or is the spelling just a little bit wrong? Have you ever heard of that company?
If the answer is “no” I recommend you to never submit the application. If you do so, you will put a mark on your credit file by applying if you are declined and if you do get a credit card there’s a good chance the terms will be terrible!
Pre approved cards may offer you a great deal but there are several pitfalls to avoid when applying for them. If an offer sounds too good to be true, it should raise suspicion and you should then carefully check the terms of the agreement before you apply.
By doing so, you may save yourself a lot of money while keeping your credit score clean otherwise you will soon find yourself chasing bad credit card offers with ridiculous terms…