Pre-screened Credit Card Offers

  • What’s the difference between being prescreened versus pre-qualified?
    • In short, prescreens are initiated by creditors while pre-qualifications are initiated by consumers. This is why creditors use language like “you’re invited to prequalify” as opposed to flat out telling you that you’re pre-screened.
    • Prescreening is essentially targeted marketing by creditors. The ‘targeting’ is accomplished by creditors selecting consumers (through filtering of information held at major credit bureaus) that they deem to be creditworthy. Prequalification is similar, but a more broad solicitation. For example, creditors can’t prescreen to consumers under 21 – but there are no such restrictions on prequalification.
    • To illustrate – prequalification is asking if the cute girl across the bar is single, prescreening is your best friend telling you that cute girl wants to grab drinks later.
  • How did I get prescreened; how do creditors have my information if I don’t already have an account with them?
    • They utilize tradeline summary data from the major credit bureaus. This doesn’t require a hard inquiry, meaning that being pre-screened doesn’t affect your credit score. Although when you do submit an application for credit, creditors will then pull your full file – resulting in a hard inquiry.
    • The annoying part of prescreening is that you literally don’t have to take any action to be prescreened by creditors. But to stop receiving offers, you have to initiate the process to opt-out. To opt-out of prescreen offers, be prepared to provide your name, address, SSN and date of birth at to be removed from the bureaus’ “eligible prescreened candidate list”. You can also call 1-888-567-8688 and provide the same four pieces of information.
  • What criteria are creditors looking for?
    • It depends. As with any other loan product, different creditors have different standards of stringency. But common examples include: whether or not you’ve had a loan charged off, the number of past due payments you’ve had over a certain time period (say three years or so), or bankruptcies.
  • So… what’s in it for me?
    • The good news is that if you’re seeking new credit card offers, many prescreened offers are accompanied by benefits for new customers – temporarily lower APR, cash bonus if spend a certain amount per year, etc.
    • The crux that the prescreen process is built on is that creditors can only pull your credit bureau info if they make you a firm offer of credit. This means that if, at time t = 0, you meet the creditor’s criteria of X, Y, and Z, then when you apply at time, t = 1 and you still meet those criteria, the creditor must approve your application. If there are material differences to your credit profile between t0 and t1, then may not get approved.
    • If you’re not looking for new offers, then on behalf of all those creditors clogging your mailbox, I apologize. Make sure you recycle those letters and opt out of prescreened offers ASAP.
  • Is there anything else I should know about prescreening?
    • Be advised that not all credit card offers that end up in your mailbox are prescreened offers. Sometimes, creditors just invite you to apply via mass marketing campaigns. You can discern prescreen offers by their FCRA disclosure which contains, in legally-required all caps: PRESCREEN FCRA DISCLOSURE.
    • You know those times when you talk about cat food in conversation and then you’re inundated with cat food ads on Google for days and days? A similar phenomenon happens when it comes to pre-screening. Some of the criteria that companies use is information on *where* you’re trying to get credit. If you request a quote for car insurance, you may find several other car insurance offers in your mailbox. It’s not because they’re selling your information to their competition (because why would they?). It’s because part of their prescreening criteria is to filter by what soft inquiries you have on your profile.

What other questions do you all have about credit? I’d love to know and am happy to educate!

— J

(one reason) why your new FinTech bank sucks

The main thing I love about Twitter is all of the inspiration I get. I become inspired to create content, save money, and start new ventures. Thanks guys!

Recently I came across some rumblings about a bank called Chime. Like other FinTech/ de novo banks, it was created within the last decade. Chime boasts, among other things, a “no hidden fees” (their words, not mine) account – including no monthly maintenance fees and no overdraft fees. 

Everyone was making such a fuss because there were several users who had accounts closed with no notification over roughly a month’s time. Let this serve as a reminder that any financial institution can (and commonly does) close customers’ bank accounts without notice and without reason. Loans are a different matter and if a bank or credit union nullifies your loan without any notice that’s a problem and you need to escalate that concern immediately. The document that a bank needs to send in those instances is called an adverse action notice. 

So I made these series of tweets earlier recently: 

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The point that I was trying to make was that financial services compliance/banking compliance is very expensive. Partly because it takes a lot of time and partly because good talent will cost a lot of money (there’s a lot to know and us compliance folks aren’t doing this for peanuts mmkay?)

A crux of the Bank Secrecy Act (BSA) is knowing who your customers are and what they are doing. Part of having and maintaining this knowledge is called doing due diligence. Many banks use a type of ‘scoring criteria’ to identify certain customers as either low, medium, or high risk. This is largely based on historic account activity – and to a smaller degree factors like your location and even whether you have a business or personal account are important. If you all of a sudden have a lot of money coming into or out of your accounts then you will begin to look high risk.  

How this comes into play with new FinTech bank accounts  is that this due diligence can seem very doable with a few thousand customers, but as a bank begins to gain steam and thousands become millions, due diligence gets more and more difficult. 

Once you get a backlog of customers it gets hard to bounce back and stay on top of the work. The path of least resistance is for financial institutions to just close any accounts that look suspicious. Of course, closing any and all of these “suspicious” accounts is bad for a business’ reputation. But a couple hundred accounts closed out of millions will by-and-large go unnoticed by the general public – except for small pockets of internet outrage. This is one way for overworked banks to balance workload with remaining compliant. 

I’m curious if any of you have been victim to a sudden bank account closing? Did the bank attempt at all to get more information on you and your transactions?

— J