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Opting Out

Does “opting out” really help your credit score? For years I have had people tell me their clients opted out and it increased their credit score by 10 or more points. In reality this is a myth. Opting out has no bearing whatsoever on a person’s credit score.

What is opting out? Opting out is a simple one step process that will help a consumer avoid receiving unsolicited product offers or service information. It can be done by going to optoutprescreen.com. Some individual banks and credit cards also offer internal opting out opportunities to cease receiving unwanted mail and offers from them.

Is opting out a good thing to do? Absolutely! It will eventually eliminate a lot of junk mail and it will help remove a consumer from trigger lists. When a person applies for a mortgage and their credit is pulled they are automatically placed on a “trigger” list by the credit bureaus. Mortgage brokers purchase these lists to look for prospective clients. Once these lists are purchased a consumer can immediately be inundated by phone calls from brokers looking for business. The trick here is that a consumer needs to think ahead and opt out at least two weeks prior to having their credit report run as that’s about how long it takes for the opt out to go into effect.

While opting out is a proactive and positive thing to do it will not affect a borrower’s credit score. If, by chance a score does go up after a person opts out it is not because of that action. Credit scores can change daily so if a score is affected it’s because something else has changed on the credit report. If a borrower looks at their credit report and thinks nothing has changed as far as balances, etc., then it could be that one of their score factors changed. Score factors are the three to five sentences listed below a borrowers credit score. They are basically an explanation of the score and are listed in order of importance with each one carrying a different point valuation. Score factors are constantly changing and any time they change, it will have an effect on the credit score. Most of the time, however, score factors are something a borrower doesn’t bother to look at.

The credit bureaus don’t acknowledge in the scoring models if a consumer has opted out or not. If it’s not part of a scoring model then it can’t be factored into the credit score. For a score to change, something has to have changed on the actual credit report.

In surveys done consumers who do choose to opt out do tend to have better credit scores. This is most likely because they are not being bombarded with constant offers from credit card companies or other service providers and are therefore not tempted to open new accounts. New accounts will automatically cause a decrease in a credit score because they have no history.

Opting out is a good thing to do however if a consumer is looking to bump their score up, opting out won’t accomplish that. A consumer instead should be looking at paying down revolving balances and keeping up with their payments. These actions will result in a better credit score.

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