What Credit Card Pre-Approval Really Means
The “approved” part of a pre-approved credit card can be a bit misleading. If you’ve ever been denied for a credit card that you were pre-approved for, then you know that being pre-approved doesn’t mean what it seems. As with any other credit card, approval isn’t guaranteed.
If you’re considering applying for a card you were pre-approved for, keep your fingers crossed, but don’t get your hopes up too high. Here’s why.
The Truth About Pre-Approval
Being pre-approved means the credit card issuer thinks you might be a good fit for that credit card. The credit card issuer wants you to apply for the credit card to see.
Why did you get a pre-approved offer if you still have to apply? Credit card issuers get prescreened lists of consumers from the credit bureaus. They ask for a list of consumers who meet certain criteria. If you receive a pre-approved offer, it means you made the cut for that particular credit card. After getting a prescreened list, the card issuer will send out a pre-approval offer listing all the great credit card features, like a low interest rate or high signup bonus, to entice you to apply.
Why You Have to Apply If You’re Pre-Approved?
Credit card issuers need to make sure you meet all their qualifications before approving you for a credit card. They can’t check your credit score or get your income to fully qualify you without you applying. Your credit information helps the credit card issuer determine whether you’re at risk of defaulting if you’re approved. The information is also used to set the pricing and credit limit if you are approved.
That’s why you still have to apply even though you’ve been pre-approved.
The Final Decision on Your Pre-Approved Card
Once you complete the credit card application, you’ll get a final decision from the credit card issuer. If you’re approved, you’ll typically find out right away. Some card issuers even give access to use your credit card online or via mobile pay.
Otherwise, the credit card issuer will send a letter in the mail if you’re denied. The letter will detail the reasons you were denied and give you access to a free copy of your credit report if your credit was a factor in the decision.
You Can Also Stop Pre-Approved Offers
If you’re not on the market for a credit card or you want to cut down on the amount of junk mail you receive, you can stop pre-approved offers. The website www.optoutprescreen.com allows you to opt-out of prescreened credit card offers.
You have the option to opt-out for five years or forever. A five-year opt-out can be completed on line or you can send in a form to opt-out permanently. You can use the same website to opt-in again if you decide you want to entertain credit card offers.
Opting-out online doesn’t stop all credit card offers. You may still get offers from credit card issuers you already have a relationship with or those who use another prescreening method. Shred these credit card offers before tossing them to reduce your risk of identity theft.
Does Pre-Approval Hurt Your Credit?
While applying for a credit can affect your credit score – because it adds a hard inquiry to your credit report – pre-approval itself has no impact on your credit report. Your credit report will include a list of companies who have pre-approved you. Fortunately, these are soft inquiries and don’t affect your credit. Additionally, pre-approval inquiries only show up on your version of your credit report. Other creditors and lenders who check your credit report won’t see them.
Don’t assume your pre-approved offer is the best you qualify for. It helps to do a little internet searching to see if there are better promotional offers available.
Many major credit card issuers also have an online pre-qualification tool that allows you to see if you’re pre-approved for any of their credit cards. This works even if you haven’t received a pre-approved offer letter in the mail.
Checking to see if you’re pre-approved typically only leaves a soft inquiry on your credit report. So it won’t hurt your credit. This can help you narrow down your credit card selection to the ones you’re most likely to be approved for.
Even if you ultimately decide to apply for the pre-approved card, knowing you’ve shopped around can give you certainty that you’ve chosen the best option available for you.