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2017-08-07 21:47:16
One Common Credit Myth

The media and internet are full of information, but sadly, much of the information concerning credit is inaccurate. Let’s check out a common credit myth:

 

Credit Myth:  “Opting Out will Increase your Credit Score.”  This is something that goes back a long time, and let's discuss what opting out is.  “Opting out” refers to a method where a consumer chooses to not have their information sold for pre-screened offers.  You’re familiar, of course, with pre-screened offers – that’s when you get something in the mail that says, 'You're approved for this credit card!' We all get them, and I would imagine you generally respond by rolling your eyes and throwing them away, like most people do.

 

The credit bureaus sell information in bulk to credit card providers. This system allows credit card providers to make offers in the mail to multiple people.  Keep in mind, these credit card providers don't get to actually see your individual files.  The credit card companies will give a generic example of what they want.  They want people with an average score of 'X' and have a set amount of existing credit cards etc.  Then the credit bureaus will actually send the data to a third party on behalf of the credit card company for mail distribution, so the credit card company never actually sees your data.  They only know that you fit a certain demographic profile they’re targeting with that particular offer.

 

If you opt out of pre-screened offers, it has wide-reaching effects. It ultimately means that the credit bureaus cannot sell your data.  If they can't sell your data, well, your data is really not worth anything to them.  So many people in the past thought they saw an increase in their credit score after an opt-out.  I’ve heard mortgage loan officers swear that they had their client opt out and within 2 week the score jumped 10 points.  As someone who’s been in the middle of this industry for many years, there's been nothing to prove that that's ever actually taken place.  


Credit scores are very fluid and can be trending up or down over time based on many scoring factors, like accounts aging, or falling off the report due to reaching the reporting limit, or due to events like late payments or collections aging.  If the score increased, it was going to increase anyway, regardless of the Opt Out.  It has never been calculated in the credit scoring model, and it has never proven to be a fact that it has.  I've never seen any relation to Opting Out and credit scoring, and believe me, I watch everything VERY closely in the industry.


I do, however, feel that opting out can be good for consumers, and is something that we definitely encourage.  If you are looking to improve your credit for the purpose of buying a home contact a professional loan officer to best understand your options.  

 

 
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