What does prescreen mean in the context of credit and lending?
Prescreen marketing is a strategy used by credit and lending institutions (“lenders”) to identify potential customers who meet specific credit criteria before extending them credit offers. The process involves proactively evaluating a consumer's creditworthiness based on a variety of data — including traditional credit information, as well as alternative and trended credit data — allowing lenders to target individuals who are more likely to qualify for their credit products. Common examples of prescreen marketing offers include pre-approved credit cards and promotional rates on new auto loans.
How is prescreen different from other credit screening methods?
Prescreen differs from other credit screening methods in its efficiency. It’s proactive and targeted, enabling lenders to reach the right audience with the right message, ultimately improving marketing outcomes and lowering costs. It also reduces the risk of extending credit to individuals who may not qualify.
How does prescreen marketing work?
What are the steps involved in a prescreen process?
While there are many ways to implement a prescreen process, the following core steps should always be included:
- Define criteria: Lenders establish specific credit criteria potential customers must meet.
- Collect data: Credit reporting agencies (CRA) gather relevant consumer credit data.
- Compile list: CRAs compile a list of consumers who meet the lender’s defined criteria.
- Create offer: Lenders create tailored credit offers for selected consumers.
- Distribution: Lenders send offers to targeted consumers via mail, email or other channels.
What specific data points are essential for effective prescreen campaigns?
Effective prescreen marketing relies on various data points to help lenders accurately assess the creditworthiness of potential customers. This typically includes credit scores, payment histories, outstanding debts and credit utilization. Additional credit attributes and data types can refine targeting and help further personalize offers and campaigns to drive better performance.
How do CRAs compile prescreen lists?
This is done by analyzing consumer credit reports to identify individuals who meet the lender’s predefined criteria. This process involves sophisticated data analysis and technology to increase accuracy and compliance with legal requirements.
Key differences between prescreen and prequalification
What is the difference between prescreen and prequalification?
Prescreening is a proactive approach taken by a lender. It involves evaluating a consumer's creditworthiness without the consumer’s direct involvement. Prequalification is a reactive approach triggered by a consumer — who must provide information and consent to do a credit check.
At a Glance: Prescreen vs. Prequalification |
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|---|---|---|
Prescreen |
Prequalification |
|
Approach |
Proactive |
Reactive |
Initiated by |
Lender |
Consumer |
Consumer involvement |
Indirect |
Direct |
When should a business use prescreen over prequalification?
A lender should use prescreen when it wants to target a broad audience with specific credit offers. Prequalification is more suitable for situations where consumers express interest in a product and voluntarily provide their information for evaluation.
Benefits of prescreen
How can a business benefit from using prescreen?
Using a prescreen strategy, lenders can target potential customers who are more likely to qualify for its credit products. This targeted approach increases the efficiency of marketing efforts and reduces the risk of marketing to unqualified individuals.
What are the advantages of targeting pre-approved consumers?
Targeting pre-approved consumers allows lenders to offer tailored credit products to individuals who have already met specific criteria. This increases the likelihood of acceptance and reduces the cost of acquiring new customers.
What are the advantages of prescreen marketing for customer acquisition and retention in banking?
Prescreen marketing helps banks acquire new customers by identifying individuals who are likely to qualify for their products. It also aids in customer retention by offering existing customers new credit products that meet their needs, enhancing satisfaction and loyalty.
How to implement a prescreen campaign
What are best practices for launching a prescreen campaign?
- Define clear goals and objectives for your campaign
- Determine and set the credit criteria for identifying potential customers
- Work with CRAs to compile current prescreen lists
- Develop personalized credit offers for target consumers
- Continuously monitor campaign performance and adjust as needed
How can a business customize prescreen criteria?
To ensure offers are relevant and appealing to targeted consumers, start by considering factors like credit scores, income levels, and spending habits. For more information, get the Quick Guide to Modern Prescreen Marketing.
Compliance and legal considerations
What are the legal requirements for prescreen campaigns?
Prescreen campaigns must comply with the Fair Credit Reporting Act (FCRA) which regulates the use of consumer credit information. Lenders must ensure their prescreening practices are transparent, fair and respectful of consumer rights.
How does the FCRA impact prescreening?
The FCRA imposes strict guidelines on how consumer credit information can be used for prescreening. It requires lenders to provide clear disclosures to consumers and offer the option to opt out of prescreen offers. Non-compliance with the FCRA can result in legal penalties and damage to the lender's reputation.
Opting out of prescreen
Consumers have the right to opt out of prescreen offers if they prefer not to receive them. For more information, visit our consumer-facing page about opting out of prescreen.
Case study of a successful prescreen campaign
What is an example of a successful prescreen campaign?
Arvest Premier Solutions, a division of Arvest Bank, offers consumer loans solely to individuals targeted through direct marketing campaigns. Its champion prescreen strategy wasn’t yielding desired results, so Arvest partnered with TransUnion to find a solution that would increase bookings. By incorporating consumer risk and financial characteristics — insights not visible with traditional views of credit data — Arvest was better able to focus marketing efforts on consumers who met its risk criteria and had a higher likelihood of responding to offers.
How did these campaigns improve business outcomes?
Arvest achieved a 56% improvement in response over its champion strategy. It also gained significant lift in the lowest risk segments with up to three times higher response rates over the champion strategy, leading to a better risk balance in its portfolio. Read the full case study
The future of prescreen and prescreen offers
Given the critical role of data in prescreen marketing, the future of prescreen lies in advanced data analytics and technology. TransUnion Advanced Acquisition is at the forefront of this evolution, offering a suite of innovative solutions that enhance the accuracy and effectiveness of prescreen campaigns. By leveraging this cutting-edge technology, lenders can stay ahead of prescreen trends and implement effective prescreen campaigns that drive better results.
