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
    • 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 with you 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 OptOutPrescreen.com 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

Credit Rules Everything Around Me

You likely know the ‘Big 3’ of credit reporting – Equifax, Experian, TransUnion. But there are PLENTY of other consumer reporting agencies (CRAs) with a variety of information on you and your checking accounts, credit inquiries, job history, and all that. Per the CFPB’s list in 2019, there are over 30 CRAs! In this post, I’ll highlight a couple of these “specialty” CRAs and detail your rights under Federal law. 

The two companies I am about to share are bound under Fair Credit Reporting Act (FCRA) provisions that secure your right to a timely and reasonable inquiry to any dispute you raise about inaccurate information. Timely means that they need to investigate within 30 days of receiving your dispute.
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ChexSystems:

This CR reports info on closed checking and savings accounts – including derogatory information like bounced checks and NSFs. They even report items like suspected fraud activity. The below snippet is from ChexSystems’ website and represents a sample line item from their report. 

ChexSystems sample report

LexisNexis (using the RiskView report as an example):

This CRA’s reports are similar to the Big 3, but offer more granular detail like what assets you own and their tax assessed values. Also items like your college education (including major!) and professional licenses. 

LexisNexis Risk View sample report

If you’re anything like me then you might have some questions around why so many CRAs exist, especially when the Big 3 are so dominant in the credit reporting marketplace. Let’s break it down.


Why are there so many CRAs and consumer reports? 

With data being the driving force behind business decision making, everyone is trying to capture the sweet spot between ‘charging as high an interest rate as possible’ and ensuring ‘on-time, full repayment’ of consumer obligations. Creditors are largely figuring out that using the same-old data from the Big 3 isn’t producing new insights, so they are after whatever other information is available. 

CRAs charge fees to furnishers that submit consumer data. Therefore, one business submitting to 10 CRAs might not make business sense, but one user of the information can choose to mix and match different reports as they see fit. 

Why should consumers care about CRAs and all of these various reports?

As previously stated, companies are utilizing as much of your publicly available data as possible. The inclusion of inaccurate negative data or the exclusion of accurate positive data can have a significant effect on your credit score. Your score doesn’t just determine whether or not you get approved for credit – it influences loan pricing and whether or not a creditor will proactively increase or decrease your credit line (in the case of credit cards). 

When it comes to credit decisioning, there are creditors who may deny your application simply due to the inclusion of a very derogatory item in your credit history, regardless of what your numeric score may be. This is commonly the case with charge-offs. A charge off is an account that has become so delinquent that a creditor has written off the balance as uncollectible and closed the account. 

Why do creditors report if it’s costly?

Per Experian, consumers “may be more likely to make payments on time” when they know delinquency could affect their credit history and lower their scores. And to the furnishers’ credit (ha!), despite all of the potentially negative info that can be reported – reporting positive payment history is very helpful for customers. I’m sure you’ve seen lists of credit cards that are seen as “good for building credit” – it’s possible that some consumers choose these businesses *because* they report their credit history and wouldn’t patronize them if they weren’t a furnisher. 

According to an FTC survey in 2015, out of 84 consumers who believed disputed information in their credit report remained inaccurate after the investigation was completed by the CRA, 42 consumers, 50%, planned to abandon their dispute. Their reason for abandoning the dispute was because they didn’t feel it was “important enough” to keep pursuing.

I just want to get on my soapbox quickly and say that you have rights and I really hope you find it within important enough to stick to your guns when you KNOW that something is wrong.

Another right that you have in regards to disputing credit information is to ask a CRA to describe the procedure and steps they took to come to the determination that the data they have is accurate. Ok, I’m off my soapbox now. If you have any questions or comments on credit reporting – I’d love to hear them. 

-J

My 8-5

So today I decided write a thread on Twitter about my career (tangentially speaking)! The thread was a bit brief, because character limits (while necessary) are quite aggy. The day-in and day-out of my job can get very tedious. But seeing these landmark cases (that I reference in this thread) puts everything into perspective. The work I do, ultimately can have direct impact on consumers (and I am consumer just like the people I help!).

To summarize some major points of the Avant (Chicago-based FinTech company) case from April 2019…

  • Avant forced consumers to repay their loans through automatic (pre-authorized) payments from their bank accounts. This is a violation of Regulation E which explicitly states: “No financial institution or other person may condition an extension of credit to a consumer on the consumer’s repayment by preauthorized electronic fund transfers […]“.
  • Avant also told people that after they completed their loan application, they could change their payment method to “paper check, money order, debit card or credit card”. But when consumers tried to pay by these methods, in many instances, Avant refused.
  • The lawsuit also alleges that Avant charged consumers’ credit cards or took payments from their bank accounts without permission. One consumer’s monthly payment was debited from their account *11* times in one day.

The full text from the FTC alleges that Avant’s limited software system was to blame for these problems. Imagine that you receive hundreds of millions in VC and can’t figure out how to actually facilitate the servicing of the loans you’re soliciting. Couldn’t be me.

The main reason I chose this case in particular is because of the rise of FinTech companies, it’s all about “disruption”. The rush to get to market, the pressure to turn a profit for investors – these challenges often push compliance off on the back burner, but having knowledge people on your team (even on retainer) can make the difference between whether or not you’re cutting checks for a settlement and legal fees.

– J