We’ve all received those credit card applications in the mail. The marketing packet tells you that you’re “prequalified” for a credit card offer. It seems like the perfect setup. You want a new card — maybe it has a better interest rate, or a better rewards program — so you apply. You figure you’re a shoo-in, since the credit issuer has already pulled your file and figured that you are an ideal candidate. As a result, when the rejection letter arrives, telling you that you don’t qualify for the card after all, you are disappointed, wondering what happened.
“There are several reasons why a consumer report may change between the initial screen, and the backend evaluation,” says Kevin Haney, a former sales director for a big-three credit bureau, and the founder of SavvyonCredit.com, a site that offers insights on the credit industry. “If the person no longer meets the original criteria, the bank may decline the offer.”
So, what are some of the reasons that your prescreened offer might amount to nothing? Here are 5 of the main reasons that Haney offers for the creditor’s change of heart:
1. Change in Consumer Behavior
Prescreened offers don’t always go out immediately. From the time your name was put on the prescreened marketing list, to the time that you actually apply for the card and are evaluated more closely, something may have changed. Haney says that some of the main changes in your behavior that can result in a credit card application rejection include:
- Late payments: One of the biggest impacts to your credit score is your payment history. A late payment on another credit card, or on another loan, might be reported between the time that the offer was made to you and the time you apply. A late payment (or even worse, a missed payment) can indicate that you are starting to run into some financial difficulties and result in the creditor changing its mind about whether or not you meet the criteria for the credit card offer.
- Increase in revolving balances: If you’re receiving a prescreened credit card offer, especially if it’s for a much better credit card, chances are that you have other credit cards already. Normally, that doesn’t matter a whole lot. However, if you are showing an increase in your revolving balances, running up more debt and not paying down the balances the way you used to, that can be a red flag. Credit utilization is the second most important factor in determining your credit score, so if your debt amount has increased, your score has probably dropped, keeping you from meeting the original criteria for the credit card offer.
- Credit seeking activity: Maybe you’re applying for any and all credit card offers that appear in your mailbox. Perhaps you’ve been applying for other loans as well. When creditors see an increase in your credit seeking activity, they might worry about your ability to handle even more credit, and reject your credit card application, even if you were prequalified just a few weeks ago.
These changes in consumer behavior might suddenly show up on your credit report when it is pulled again to verify that you qualify for the card, and change the situation. Additionally, if you start these behaviors shortly after receiving the prescreened offer, the credit issuer might have second thoughts.
2. You Have Moved
“Changes in address sometimes result in different information being pulled together on a report,” says Haney.
After your move, it might appear that your situation has changed, or different information is being presented in your report. Since your credit report impacts your credit score, this might mean a drop in your credit rating. In some cases, a credit issuer might look over the new report information, and decide that you no longer qualify. Sending your application in with a different address might change the way you are perceived, and you could end up being rejected.
3. Your Name Has Changed
Your credit report is identified by your name and your Social Security number, as well as with other identifying information. When you get a new name, a new report might be started, and the two might not be properly merged.
Haney points out that many people get married, or they start using hyphenated names. Sometimes, they use nicknames on credit applications, or they add a middle name on some applications, but not on others. “If the names are inconsistent, the reports could yield different information.”
So, if you apply for that prescreen credit card offer, but you use a name that is different to the name used by the issuer making the offer, different information might come up. This could result in a different score, or different information keeping you from meeting the criteria. This can be problematic when it comes to your credit card offer.
Another consideration is what happens if someone else shares your name. You might experience a credit report mix-up that results in your credit card application rejection. There are instances of fathers and sons that share names getting their information mixed up. But, if you have a common name, it might not even be a relative whose report is mixed with yours. My brother has a very common name shared with thousands of people. One of them is an uncle, and one is a cousin, and all three of them have such a common name that it’s a matter of “when” that another person’s bad credit ends up tarnishing their financial reputations.
If you have changed your name, make sure that the credit bureaus are aware of it and make proper changes to your total credit report. Also, make sure that you use the same name on your credit applications so that you aren’t rejected due to name differences. Double-check to see that all the information on your report is truly yours, and that you aren’t being mixed up with someone else who has a similar name.
4. Other Identifying Information is Different
It’s not just an inconsistency with your name that can cause a rejected credit card application. If you provide information on your application that is different from what the bank initially used to generate the prescreened offer, there is a good chance that you will have a hard time qualifying for the initial credit card offer. Different identifying information can mean different information associated with your report. “If you provide a Social Security number, date of birth, name, or address, the combination may differ from what was used initially,” says Haney. And that means a report that might not be quite up to snuff.
It’s important to check your credit report regularly so that you can identify and fix errors on the report. Perhaps the information used to generate the prescreened offer was inaccurate, and has since been corrected. Or, perhaps, some inaccurate information was added to your report between the time the prescreened offer was made and you applied for the credit card. In either case, the inaccurate and inconsistent information can mean that you are no longer considered an ideal candidate for a particular credit card, and that your application is rejected.
5. The Bank Uses a Report from a Different Bureau
“The bank may prescreen with bureau one, and pull the backend report from bureau two,” says Haney. This is important to understand, since different bureaus may have different information. In fact, there is a good chance that, if you were to look at the reports from the three major credit bureaus side by side, you would see differences between them.
The reality is that credit reporting is based on what creditors tell the bureaus. A creditor may choose to report to one, two, or three bureaus. However, a creditor doesn’t have to report to them, so that means that there are often inconsistencies between reports. If a credit issuer looked at one report and saw that you qualified using that information, but pulled a different report — with different information — that told a different story, your application might be rejected.
When a creditor rejects your application, you are presented with the name of the bureau that provided the information. You are entitled to a free report from that bureau, outside the free report you are entitled to each year from AnnualCreditReport.com. Check that report, and see if there is information on there that might be inaccurate, or that might be casting you in a bad light. That could be an indication that it’s time for you to change your habits — or check to see if your identity has been stolen.