Definition

• Pre-approved credit results from pre-screening of your credit report information. The Experian, Equifax and TransUnion credit bureaus allow marketers to buy lists of people meeting predetermined qualifications. For example, a credit card issuer might purchase the names and addresses of consumers with a certain credit score or at a specified income level. You get the pre-approved offer, which is really just a marketing piece, because you meet the appropriate specifications.
  
  

Considerations

• Your circumstances sometimes change between the time you get a pre-approved credit offer and when you redeem it. For example, you might lose your job, run up your credit card balances or even file for bankruptcy. The lender checks your credit reports for bad activity before it opens your account. You are denied if there is enough negative information to make you an undesirable borrower.
  
  

Alternatives

• Many pre-approved offers tout big benefits, like generous rewards programs or low introductory interest rates for credit cards. Such offers are reserved for customers with the best credit ratings. The lender may decide your credit rating is not quite good enough for its initial offer when you try to redeem the pre-approved application. It may make you an alternative offer, like a credit card or loan with a higher interest rate, rather than denying you completely.
  
  

Pre-approval vs. Invitation

• Not all credit offer mailers are pre-approved. Some banks send out mass mailings inviting consumers to apply for a card without doing any pre-screening. Lenders process these applications in the same way they would handle a credit request that you initiated yourself, so you have no approval advantage.
  
  

Warning

• Pre-approved credit offers heighten your fraud risk because anyone can redeem them in your name. Thieves take applications from mailboxes or retrieve them from trash cans, then send them in. The fraudsters claim there is a new address or steal the loan check or credit card from your mail when it arrives. Stop this activity by opting out of pre-appovals through OptOutPrescreen.com, the Federal Trade Commission advises. The Fair and Accurate Credit Transactions Act lets you stop the credit bureaus from selling your information, and that website is the official place to do the opt-out.