So You Think You Are Pre-Approved?
by Barry Noret
CreditMania.com, Inc.
You get that envelope in the mail stamped pre-approved!
Exciting! Right?
A *true* pre-approval offer is required by law to have text
informing the consumer that their consumer credit report was used in conjunction
with the pre-approval offer. It also must list the number to the credit bureaus
that supplied the information in case the consumer would like to opt out of
future offers.
Generally, a pre-approval is done in one of two ways:
I. The company, institution, etc. sends a database of consumers or
customers to the bureau. A pre-set selection criteria is decided upon (Example:
no 30-day lates ever, no public records, at least 5 open trade-lines, revolving
accounts utilized at less than 50%, at least 4 years on file, inquiries not
exceeding 6 in a 12-month period). The list of consumers is run against records
at the credit bureau. Anyone who passes all of the criteria is returned.
Everyone who is returned MUST be given a bona fide offer of credit within 60
days.
2. Demographic information is used to select persons that meet the same
qualifications, say in a certain geographic area, and a list of those consumers
is returned. Only those who pass all of the criteria are returned. Again, a bona
fide offer of credit is required within 60 days of the prescreen.
Now, most financial institutions will put in their disclaimers notation that
allows them an "out" if, *and only if*, after accepting the offer, the
person no longer meets the criteria used to select them originally. They may
also note exceptions such as an income level that must be met.
Say, since the offer, the person is now 30 days late on their car loan. They no
longer meet the criteria of "no 30 day late's ever" and this would
allow for a decline of credit. If the person still meets the same criteria, the
offer of credit must be given.
Always look carefully at the offers...a true pre-approval will always have
notation that the credit report was used in conjunction with the offer. These
prescreens, by the way, just are listed as a promotional inquiry and cannot be
seen by potential creditors...they will, however, be listed on a consumer credit
report if you order it directly from the credit bureau.
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