Credit Cards – The Dangers of Pre-Approved Credit

Everyone has received at least one pre-approved letter of credit for a credit card, line of credit or even a mortgage to their mail or email accounts. This type of credit can be both a benefit for anyone looking to build their credit but dangerous for those who are not financially stable enough to handle this amount of credit. It is important to remember that the credit card industry is a business and every business is looking to make money. They receive a great deal of response from these pre-approved letters and often acquire thousands of new clients through this marketing technique. It is important to take a very close look at this pre-approval letter so if you do choose to utilize this offer you know exactly what you are getting yourself into.

There are many different types of dangers that can be associated with these pre-approved credit card offers and the number one is identity theft. When you receive any of these offers that you are not going to take advantage of make sure to cut it up or shred it so no one can utilize it in your name. Aside from this the danger overspending is the most prominent side effect of these pre-approved credit card offers. Just because you are pre-approved does not mean you need to have 10 credit cards to your name. These offers make it too easy for people to buy more and more items they cannot afford and run their credit card debt to an out of control level that can affect your future as well as your credit scoring.

On the other hand, pre-approved mortgages can be used as a great resource to help prospective home owners learn just how much credit they can be approved for when it comes time to finalize their home owner’s contract. When you are thinking of buying a new home, it is important that you take the time to understand what your budget is and this is where pre-approved mortgages become a handy tool. Now you have a good idea of the type of mortgage you will be approved for. From here you can make the appropriate calculations to figure out your monthly mortgage payments and decide before you even begin house hunting if you can afford to buy a new home.

Pre-approved credit can be a good thing if you know how to use it properly. This is a great way to build up new and good credit standing for those who are suffering from bad credit. Before you ever decide to use any one of these different pre-approved offers is to read the small print. Often times you will find that these pre-approved cards are tied to high interest rates as well as annual fees that do not make them worth while. These are the type of fees that can bring down your credit and make it hard to even maintain a credit card and if you are suffering from bad credit, these are not the offers for you.