Prescreened offers don’t hurt scores, except when they do

This post originally appeared March 3, 2016 on CreditCards.com as “Promotional inquiries’ impact on your credit score”

By Barry Paperno

Dear Speaking of Credit,
Do prescreened offers affect your credit score? Someone told us they do, so I thought I would ask you. Thank you so much for your time. — Marie

Dear Marie,
By themselves, prescreened offers don’t affect your credit score. In fact, the only place that prescreened credit offers are mentioned are as a credit report notation saying a “promotional inquiry” has taken place. But there may be some indirect impact.

Prescreened credit offers are familiar to most consumers as those new card and loan solicitations appearing in millions of mailboxes daily.

Here’s how they get to your mailbox:

In anticipation of making such offers, a lender will approach the credit bureau with a request for a list of consumers meeting a set of specific credit and other criteria. Relying on the various parameters outlined in a prescreened list request, the lender attempts to screen out both 1) the high credit-risk consumers — the lower their credit scores, the more prone they are to accepting such offers — and 2) the low-risk consumers whose high credit scores have, in part, been achieved through their ability to ignore these kinds of credit offers.

Stepping back a bit for some basic facts about inquiries, any time a consumer’s credit bureau file is accessed for any reason, the Fair Credit Reporting Act requires that a credit inquiry be added to the consumer’s credit report. It remains there for two years. Inquiries involving prescreened credit offers are no exception, with the potential of being considered as either a hard inquiry that can impact a credit score or a soft inquiry that can’t — depending on where in the prescreened offer process the inquiry occurs.

As a rule, hard inquiries arise from consumer-initiated requests for credit while soft inquiries come from evaluations that don’t grant credit, such as:

  • Account management inquiries — periodic credit checks of existing account holders by creditors.
  • Consumer disclosure inquiries — consumers pulling their own credit reports and scores.
  • Credit-based insurance score inquiries — credit information used to help determine if auto or homeowners insurance will be offered to a consumer and at what price.

The initial credit check leading to a consumer’s name and address appearing on a prescreened offer list is never prompted by a consumer’s request for credit; therefore, the result is a soft inquiry that doesn’t affect scores. And for those high-scoring consumers and others whose typical response is to simply toss the mailer into the trash, that’s the end of the story with no credit scoring impact having taken place.

But what happens if the offer is accepted? This is where the story gets more interesting.

Upon acceptance of a prescreened promotional offer, the cautious lender will further attempt to minimize future risk by conducting a second check of the consumer’s credit prior to opening a new account. This additional and more in-depth credit review can often reveal substantially higher or lower risk than was indicated in the original credit pull. With this additional knowledge of the consumer’s current credit picture, the offer can be better tailored to the consumer’s current risk level or, in some situations, withdrawn entirely.

Whether credit is granted or denied after the second credit check, the resulting inquiry is considered “hard,” since by accepting the offer the consumer has essentially made a request for new credit. This hard inquiry can then affect the credit score for up to one year, though any such loss of points is usually quite minimal, with five or less being most common.

All of this is to say that as long as you don’t accept a prescreened offer, there’s no risk of any impact to your score. It’s only if you accept the offer that your credit score can be affected by the hard inquiry, albeit by only a small number of points and over a relatively short period of time. So, whether a credit offer is eagerly accepted or tossed without a second thought, there’s not much to worry about in terms of its effect on your credit score.

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