Prequalifying customers for tailored offers
An important reason why many institutions use soft pulls is to, as we mentioned, prescreen a candidate—but the ultimate purpose is to tailor products that the customer is prequalified for. Products in this scenario can be defined as any good or service which requires creditworthiness as a qualifier, this can mean: a loan, a credit card, an insurance plan and more.
What is Credit Worthiness?
Creditworthiness is a how a lender or institution determines whether you will be able to pay back the loan or of your worthiness to receive new credit. As such it is an important determinant of many critical life decisions. Though a few different factors determine your creditworthiness, you have the most control over two of them:
For lenders and institutions creditworthiness is a suitability test and its most important metric is how well and how responsibly you have managed your credit—which is measured by creditworthiness. It is also why it’s important to start building your credit before you need to rely on it.
By using creditworthiness as a metric, lenders and institutions can tailor products for customers who are in different tiers of creditworthiness. A benefit for the customer in this scenario is that this allows lenders to potentially anticipate a need, creating more relevant products and services, as well as gaining a better understanding of the customer.
However, this also means its better to become credit worthy before you need to be. Although credit scores, on some instances, be raised dramatically, payment history cannot. Which is why it is important to lenders and institutions. A payment history can be used to gauge a person’s ability and willingness to manage their credit responsibly. Some red flags may include late payments, missed payments, and financially unsound decisions.
My soft pull is an educational resource sponsored by Credit Bureau Connection to inform people about soft pulls and how they are used in the lending process. Credit Bureau Connection (CBC) is authorized by all three major credit reporting agencies, Experian, TransUnion, and Equifax, and specializes in soft pull credit report solutions.