Did you know opting out doesn’t increase your credit scores?
There is an abundance of information and advice regarding credit scores floating around online. Most of it is well-intentioned and much of it is accurate, but there is still a great deal of misinformation polluting the Internet. Sorting myth from reality is a constant challenge, which we address in the credit-scoring myths section of the VantageScore website. This month, our Did You Know article dispels yet another myth: The supposed impact opting out of preapproved credit offers has on your credit scores.
Credit card issuers and other lenders can buy prescreened lists of consumer names from each of the three credit-reporting companies and then mail these consumers offers of credit, via the prescreening process described here.
The Fair Credit Reporting Act (FCRA) allows consumers to have their names removed from any of these prescreened lists, a process called “opting out.” When you’ve opted out, the credit bureaus can no longer sell your name as part of any prescreened list.
The myth associated with opting out is that your score will actually improve as a result of you doing so. This is false. Your choice to opt out or not is not even reflected in your credit files at the CRCs, so credit scoring models cannot and do not consider your choice whether to opt out when determining your credit score. Again, the choice to opt out has no direct influence on your credit scores.
The next logical question is, “Could there be an indirect influence on your credit score if you choose to opt out?” The answer is also “no.” The only impact opting out has on your credit reports, which are the sole basis of information used to determine your credit scores, is that by doing so you’ll reduce the number of soft inquiries appearing on your reports. Soft inquiries are those posted to your credit reports if your name has been sold by the credit bureaus as part of prescreened lists, and soft inquiries have no effect on your credit score.
Many consumers mistakenly believe that fewer inquiries on a credit report lead to improvement in credit score. That misperception assumes soft inquiries have an impact on your scores, which they do not. Soft inquires are never seen or considered by lenders or credit scoring models, so whether you have one soft inquiry or 100 of them, they have no impact on your credit scores.
If you’re tired of receiving credit card solicitations in the mail, then opting out is a great way to reduce or eliminate them. But if you think opting out will improve your credit scores, then you are mistaken. You will have to pay your bills on time and stay out of excessive debt in order to accomplish that goal.