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Opting
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If
your mailbox is like mine, you get a lot of offers
from credit card companies to open an account with
them. We certainly get a lot more offers in the
mail these days ever since the telemarketers were
effectively put out of business. How can these companies
find and solicit us if they can’t call us? For many
creditors, bulk mail is a cheap alternative.
Of
course, success in the bulk mailing business means
starting out with a good list. The whole idea is
to do “target marketing.” Rather than mailing to
everyone, you just want to mail to those people
who are likely prospects. That makes sense. If you
are a Democratic candidate, you wouldn’t want to
send mailers to thousands of Republicans urging
them to vote, would you? Of course not.
Issuers
of credit cards want to solicit those people who
have good credit. But how can they tell if you are
a good credit risk or not? The answer, conveniently,
is from any one of the three credit bureaus, Experian,
TransUnion, and Equifax. These people have lots
of information on practically everyone. All creditors
with whom you have an account reports monthly on
your balance due, the monthly payment, and whether
or not you make you payments on time.
In
addition, they also run your personal information
through any one of the number of credit scoring
models available. The most common were developed
by FairIsaac Corp and are commonly referred to as
FICO scores.
This
process is called pre-screening and here’s how it
works. A creditor that is interested in developing
new business asks the bureau for a list of those
borrowers who have, say, credit scores higher than
720. They may refine the search by asking for borrowers
in certain areas only. And the bureau will give
that list, for a fee, so much per name. That business
is especially profitable to them. And it is cost
effective for the creditor too. Instead of mailing
to 1,000,000 people, they send mail only to those
100,000 they would almost certainly approve.
That’s
why the solicitations you get usually carry some
verbiage about being pre-approved. And they are
serious. It would be highly unusual for a creditor
to deny credit to someone with a 720 FICO score.
And because you are pre-approved, you would feel
more confident about completing the application.
You
may resent the solicitations and there is something
that you can do about it. But, not surprisingly,
it is not easy to find at the bureau’s websites.
Figure it out. Once you opt out, they can’t make
any more money off of your name and information.
So they don’t want to make it easy for you to opt-out.
I did find the following link at the Equifax website:
Does
Equifax use consumer credit information to market
consumer products and services, or sell my name
to direct mail companies?
Unfortunately, the link is to a page that didn’t
answer that question. I guess they don’t want you
to know. You can’t even send them an e-mail without
signing up for one of their services.
There
is another issue here that has to do with mortgage
business, and it’s insidious. It’s called “trigger
list” marketing. Let’s assume that you select a
mortgage lender and make an application with them.
They will run your credit report of course. At this
point, the bureaus all know, “Here’s a live one!!!!!!!!!!!!!!!!”
Assume further that there are several lenders who
have told their bureau, “If you find a mortgage
applicant meeting our criteria, let us know immediately.”
Immediately can mean that night! That’s immediate
and it’s important because they want to get you
before you are too far along in the process.
At
that point you can theoretically get offers from
three more mortgage companies, ones that know nothing
more than you have a certain credit score and where
you live. Given this information, most knowledgeable
lenders can find peoples’ phone numbers.
So
you’ve gone through a thorough shopping procedure,
chosen your lender, and have made your application.
You think everything is cool. But then the next
day you get phone calls from three more lenders
all saying, “Whatever deal you were offered, we
can beat it.”
Well
maybe they can, maybe they can’t, and you don’t
know anything about the company other than that
they know how to dial a phone. Even if you decided
to follow up with one of them, you have to give
them lots more information for them to prepare a
realistic quote. Do you really want to do that?
There
are some interesting legal issues here. Theoretically,
creditors who get this type of information are supposed
to be able to give you a firm offer of credit. With
a credit card, that’s easy, but a mortgage is far
more complex and has too many variables for this
type of approach. Maybe it’s legal, maybe not. My
opinion is that it is likely to be found not to
conform to the legal requirements but don’t expect
changes anytime soon.
In
the meantime, you do have the ability to opt out
pre-screening and prevent this. You can do so at
http://www.optoutprescreen.com
Go
for it!
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