Why am I getting "Pre-approved" loans from random financial institutions in the mail?

Question

Lately I've been getting letters in the mail saying that I've been pre-approved for a $2000 dollar loan by some random bank or financial institutions. I've never given out my address to anyone. I wonder how those companies obtain my mailing information, and if there's a way to stop them?

Answer 1

Pre-approved means they ran some basic info about you through a very simple model and have guessed that you are likely able to pay it back. Of course you won't actually get the loan until you provide all the detailed info they need.

They got your name and address because somebody sold them a list of customers. It could have been a college, a store, or a magazine company.

They can even buy your credit info from one or all of the credit agencies.

Corporations, and institutions make some money by selling their lists. Sometimes buried in the fine print is the fact that they will sell this info to their partners. There are ways to stop the offers, but they depend on where you live, and what lists you are on. (Edit from JoeT - these offers should contain the details for 'Opting Out.' Once this is requested, the offers will be greatly reduced. Not zero, but 90%+ reduced)

What to watch out for? It is simple, throw all these offers away. If you do need a loan or credit card you should start the process by researching companies, not by deciding on a vendor based on what junk mail they send you.

If you do end up getting a credit card or a loan, these offers will continue. The credit agencies will provide a list of customers with new lines of credit to somebody willing to pay. They will offer you balance transfers, better rates, larger credit lines. Some of the offers will also come from your bank or credit card company. The advice is the same throw them away.

If you want to see a flood of offers, just get denied for a credit card...