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: 

Screenshot 2020-01-01 at 4.08.44 PM
Screenshot 2020-01-01 at 4.09.15 PM

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

Currently kindling…

Hi all! I figured now would be a good time for me to reflect on my financial journey, who I am, and where I want to be in the future. 

The basics… my name is Janae.

it’s me!

I live in Wisconsin, I’ll be 26 in a couple of weeks, I work in financial services compliance, blah blah. When I first created my Twitter back in August – I really didn’t have any desire to create a blog to go with it. But 2019 has been my year to play around with different side hustles/ventures and see what I like the best – I’ve found having a blog/website to be a good place to document my journey (and Twitter has been regulated for memes). 

Onto the main attraction… FIRE. We know it, we love it. If for some reason you’re not yet indoctrinated, FIRE =  financially independent, retiring early. 

What does FIRE and financial independence mean to me?

I had a hard shift in mindset in fall/winter of 2018. In September 2018, I left my first “adult job” for something new in the same field. At my first job, I got to travel all of the time, my coworkers felt like family, and my workload wasn’t too heavy – I didn’t realize how great I had it back then. When I started my second job, I felt the change in culture and atmosphere pretty quickly upon settling in. I was surrounded by a lot of inexperienced, young managers, office morale/outlook was low, and my coworkers were cordial, but not all that nice. It was then that I realized the necessity to secure my financial future and create a life where I didn’t need to work for money.

That’s what FIRE means to me – the security to spend my time how I choose. The freedom to succeed and thrive on my own terms, not when tax laws *allow* me to access my retirement funds. I am no longer comfortable subsidizing my financial freedom with a car payment every month and an apartment full of things. (An aside… that all felt really good and invigorating to write.) ❤

And now… the number$! I have been maintaining a spreadsheet with my net worth since late November 2017 (and thank god because I was probably around -$10k for the majority of 2015 and 2016). A chart of my net worth (NW) since that time is below. 

Key moments:

  • November 2017: Here I had probably 10k in credit card debt and was hardly throwing anything more than the minimum due @ it every month. I took two international trips in 2017, and one in 2016 (each 10 days) – to my bank account’s dismay…
  • Late-fall (?) 2018: The spike in money was relocation incentive and then the subsequent decline was moving expenses for the aforementioned ‘second job’.
  • December 2018: Received a small inheritance from a family member’s passing.
  • June 2019: 10 day trip to Europe and expenses incurred by an out of state move for another new job!
  • September 2019: I finally started to automate my saving. Previously I was just throwing money into my investments whenever I felt like (which wasn’t very often). Now I have an auto transfer from my savings → checking every month. And then from checking → investments. It all happens without any input on my part. 

As it stands now in early December, my net worth is just under $29,000: of which $20k is liquid. My number at which I would FIRE, currently, is $750k ($30k annual spend). So I’m only at 3% FIRE. My beginning goal was to FIRE at 40, but without some major luck & income boosting between now and then, my time frame is likely pushed out to 43-44 – which I’m still very happy with! 

What do your financial goals look like? If you’re after financial independence, do you also want to retire early or no? Looking forward to hearing from you!


A loan by any other name…

In today’s edition of “things that don’t sit right with me” – online layaway. I’m being facetious, but the premise is quite similar!

Affirm and Afterpay both offer customers the opportunity to pay for their online purchases over time in more palatable installments versus a lump sum payment. Both set out to solve retailers’ issues of low conversion rates [Conversion is turning traffic into revenue aka sales]. The main difference is that with traditional layaway – you have to make the payments before you receive the merchandise. But with Affirm and Afterpay, you get your stuff and then deal with the bill. A breakdown of some key differences between these two business models…

  • Affirm
    • generally for stores w/ higher priced items – Wayfair (furniture), Priceline (hotels, plane tickets), Purple (mattresses), etc…
    • actually markets itself as a loan (i.e. – lists APRs and is transparent about pulling credit reports)

snapshot of Priceline checkout w/ Affirm

from Affirm’s home page. but the terms of service state that Affirm loans range from a fixed 10% up to 30%, so what’s the truth?

  • Afterpay
    • retailers at this point seem to be mostly clothing stores & other discretionary goods? (Forever 21, Madden, Ulta)
    • interest-free service where you only pay late fees if you miss payments

snapshot of Afterpay

I went through the terms of service for both of these companies just to see what the deal is. Because Affirm is a bit more forthcoming in their advertisement, I’ll switch gears and focus on Afterpay.

What gets me about Afterpay’s marketing is the insistence on “free and easy”. I completely understand that they make (probably a good portion of) their money from marketing. Let’s say Jane Doe is fresh out of college and has landed her first full-time office gig. Hoodies and Uggs may have worked in lecture, but aren’t becoming for the workplace. Now Jane needs office clothes ASAP but money is tight. Urban Outfitters offers Afterpay so she can pay off her clothes easily over time while GAP doesn’t – so she’s going to go with Urban Outfitters instead. I totally comprehend that business value.

I couldn’t figure out how the application decision worked given their lack of transparency around when they decide to pull a credit report. But there IS decisioning logic used on Afterpay’s side, because they frequently reference application approvals in their ToS (so logic would have it that there are denials as well).

And to their credit, why would any business give away thousands upon thousands of dollars only under the protection that I, as a consumer, pinky promise to pay it back? Not to mention, that without the added service of an installment loan, Afterpay would be nothing more than a carbon copy of Rakuten (formerly eBates). The following sentence comes verbatim from their Terms of Service:

You agree to provide any information or documentation reasonably requested by us to verify your identity in connection with your Afterpay Account, and you authorize us to make, directly or through third parties, any inquiries we consider necessary to verify your identity.

So at some point in the future (or perhaps never at all!), Afterpay may pull your credit report to determine that you are who you represent yourself to be. But it’s the uncertainty of pulling the credit report that is a bit troubling. If I’m making a $500 order, will you pull my credit? What if I successfully paid off my first $200 order w/ no issue, but then during my next $600 order – I slip up and am late with my third payment? Before I make my next $650 order, will you make a credit inquiry to see if I’m becoming insolvent or if that was just a fluke? Who knows, but if you agree to the ToS, Afterpay has that right and can invoke it at any point during your agreement.

We may, in our sole discretion, not provide the Installment Feature to you, or cancel an approved order before the goods or services are delivered or supplied for any reason including but not limited to your history of transactions with our service provider Afterpay or to prevent against fraud, legal, regulatory or nonpayment risk.

— From Afterpay’s Purchase Payment Agreement.

I don’t want this post to seem like an indictment of Affirm or Afterpay, or anyone who has used or plans to use these services. The holidays are pretty here, and using an installment loan can certainly help to make the financial hit of the season feel a little less harsh. I just to inform others to be weary of hopping onto the newest, hottest service without doing some due diligence. So… what will be the next innovation in the online shopping experience? Do you use these apps or any other similar services?

– J