Credit Card Pre-Approval: What Does It Mean?

Credit card pre-approval will let you know whether you have a strong chance of getting that card, though that is not certain. If you are pre-approved for a credit card then it saves you from rejection from credit card and trial-and-error-tactices which will impact your credit score. But you shouldn’t think that pre-approval guarantees that a card issuer will approve your credit card application if you apply.

What does a pre-approved credit card mean?

If you’re someone who is pre-approved for a credit card,it means that you’ve met all the requirements of the credit card company (known as a firm offer of credit) for a card. Utilizing the information which is present on your credit report, the lender will extend an offer if they determine you meet the approval criteria and are creditworthy.

Mentioned below are some of the factors they might look at include:

• Bankruptcies
• Credit usage
• Payment history
• Credit score

Credit card companies acquire this information using a soft check, which means that your credit score will not be affected. Although, these companies will later do a hard check on your credit if you accept a pre-approved offer or apply for any other of their credit cards.

Banks or Credit Card Companies offering Pre-Approved Credit Cards

Eligibility for Getting Pre-Approved Credit Cards

Eligibility for getting pre-approved credit cards depends on a person’s payback capacity and creditworthiness, which are assessed through their credit score.

Lenders evaluate these factors using reports from the three main credit bureaus – Equifax, Experian, and Trans-union. They analyse FICO Scores, Vantage-scores, and detailed credit reports, which reflect financial behaviour like payment, history, credit utilization, and outstanding debts.

The credit card company checks your payment pattern, or if you have any ongoing debt, what are your financial condition, and any other credit availed by you.

Some other things that the credit card company checks out is mentioned below:

• Personal information: This includes information like full name, nationality, date of birth, and martial status.

• Address details: You are supposed to supply your current address, past addresses to cover a certain period of time and whether you rent your home, the property or live with family.

How Credit Card Pre-Approval Works

1. You or an issuer initiate a soft credit pull: Some creditors do soft pull citizens’ credit reports from time to time without their permission as they seek to know who qualifies to be given a credit card. Still, you can also log in to most of the issuers’ websites and check your pre-qualification yourself. In any case, this one is a soft credit check which will not affect your credit rating in any way.

2. You receive an offer: Sometimes, credit card companies have pre-screened data and send you, for instance, a credit card offer through mail or as an e-mail. Some issuers of credit cards that you use may also send new offers of credit cards directly to your online account. Or, if you find it on your own, you might receive a few offers of one or multiple cards on the internet.

3. You read the terms: Every credit card that comes with pre-approval will include the details about the card such as the terms of the card, the rewards, benefits among others. It will also have a validity period within which the issuer believes that, based on the credit information you provided, your chances of getting the credit are high.

4. You choose whether to apply: If you do not apply for the card, nothing will change, however you may get more pre-approved offers in the future. If you do apply for the card, though, the experience will be just like any credit card application process. You’ll be asked about your personal and financial details, which is quite standard. But you will have to apply on it from a particular web address or use a code that should accompany the application to show that it was pre-approved.

5. The issuer does a hard pull: Pre-approval does not actually do a credit check on you; instead, it only performs a soft pull. However, when you go apply for a particular card that you have been pre-approved for, you will nearly always have to agree to a hard credit check, which will reduce your credit score by about 5-10 points for some duration of time. With proper behaviour, that is extremely easy to recover from.

6. You wait for a decision: You should receive the decision quite soon. If you get approval, your card must be delivered within 7 to 10 business days. If your application has been declined, the issuer will inform you of why your application was turned down. However, if you find that your credit card application has been denied , you can still speak to a customer service representative and plead your case saying that you were pre-approved.

Pre-approved vs. pre-qualified credit card offers

Pre-qualified and Pre-approved are terms that most issuers use to down that one has complied with a set criterion that was created prior to the time of applying for a particular product. If you have a pre-approval offer, this means the credit card company initiates the contact first as you are qualified in meeting minimum qualifications.

Pros and Cons pre-qualified and pre-approved credit cards

What are the benefits of a pre-approved credit card?

Being pre-approved for a credit card makes getting a new credit card as easy as a piece of cake.

Here’s how:

• Pre-approval doesn’t affect your credit score:

Hard credit checks can be bad for your credit score and this is especially so if several hard credit inquiries are seen on the credit report within the space of 45 days. But the pre-approval process only entails a nominal credit check, a soft inquiry. This is important because you can research a number of pre-approved credit card offers and then apply for one without harming your score.

Remember the rescission terms if you apply for an offer you receive, the lender will pull through a hard inquiry on your credit profile to reach a decision on the credit you applied for.

• Credit Card companies come to you:

Credit card offers are given to you in advance, unlike other loans where you have to look for them. You don’t have to visit various websites and try to determine which of the cards you might like better and what offers you might get. But if you have a good credit score and lived through a nice credit history, you may be offered nice benefits and good rewards.

• Compare rewards and other perks:

Pre-approval allows you to discover the credit cards that you are likely to be accepted and often comes with information on the products themselves. Whether you have recently been searching for the best travel rewards credit card or the credit card with the highest cash back rate, the pre-approval option allows card users to make the right comparison. You may also consider card security such as $0 fraud liability on unauthorized purchases on credit cards.

• You can utilize offers for debt consolidation:

Some of the pre-approved credit cards include promotion in low introductory APR. If the promotional APR applies to balance transfers, on the way to shape a credit card into a debt consolidation loan, you might. In that case, consumers can transfer balances from high-interest accounts to the new card to help pay off the credit card debt obviously faster and with lesser interest. But always bear in mind that in most cases there is a balance transfer fee that ranges between 3-5% of the amount you transfer.

Should I accept a pre-approved credit card?

It’s necessary to weigh the pros and cons of any credit card or loan offer before you agree to use that credit or apply for a new loan.

Some of the most important details are mentioned below:

• Debt-to-income ratio: This is your total monthly debts, credit cards, loans, mortgages, child support and other everyday expenses you are likely to incur in a month, averaged on your gross monthly income. This means, the lower your debt-to-income ratio, the better placed you are to make new payment commitments. On a smaller level, if your score sits below 43% on average, you ought to be able to manage a new credit card without a problem.
• Interest rate: Credit cards have a higher rate of interest as compared to any other type of credit. Look at a personal loan if you require credit, but at the same time, don’t want a high interest rate.
• Rewards and perks: There are still some benefits and bonuses that a credit card provides to individuals who have newly signed up for the card and which can be useful to you.The only thing you need to beware is annual fees.
• Introductory offers:All sorts of credit cards come with temporary interest rates that are lower than usual. While some might offer a higher cash back for the first year of membership, or allow to transfer the balance from a different credit card without charging interest for the first half year or year.

Are there any downsides to a pre-approved credit card?

The downside of pre-approved credit cards are mentioned below:

• You have to pay the interest on the outstanding balance each month. 
• Hard inquiries might impact your credit. 
• You might impact your credit through overuse. 
• If you miss payments it will negatively impact your credit. 
• You could assume debt that can stress your financial situation.
• Some cards have high interest rates.
• You could become a victim of credit card fraud.
• You may need to pay credit card fees.
• Pre-approved credit card mailers could increase the chances of identity theft.

How to opt-out of pre-approved credit card offers

Mailings of credit card offers may turn into rather irritating, for example, if one has a favorable credit rating and does not seek a new credit card. In addition, these offers – should someone steal your mail or accidentally deliver the mail to a different person – could potentially enhance your risk of identity theft.

If you find yourself overwhelmed by unsolicited offers or if you’re not in the market for a new card at all, you have a couple of options:

• Visit www.OptOutPreScreen.com – it is the website owned by the three NCA’s CRA. Here you will be able to complete a form requesting to be excluded from these offers for five years or you can download a form which will allow you to permanently opt out of receiving them.
• There are also toll free numbers 888-5-OPT-OUT that will allow you to control the type of offers that you will be receiving or to completely opt out of pre-approval offers.

Frequently Asked Questions

Does pre-approval or pre-qualification impact your credit score?

If you accept the pre-approval or pre-qualification offer only then your credit score will be impacted. Once the offer is accepted, then the application will trigger a hard inquiry and that can impact your credit score.

Can you be denied a pre-approved credit card?

Yes, there is a possibility that you can be denied a pre-approved credit card. If during the hard inquiry your financial situation differs from when the  bank sent the approval, then there are chances that the credit card company can choose not to approve your application. 

What builds credit fastest?

There are many ways through which you can build your credit quickly. First one is you can apply for secured credit cards, timely pay your bills, ask to be added as an authorized user on family member’s accounts, and pay the bills of your credit card as quickly as possible. Having many types of credit (credit cards and a mortgage) will also help you build your credit. 

What details do you need for credit card pre-approval? 

In some cases, you’re not required to provide any detail at all to be pre-approved for a credit card. You will receive an email, an online message, or a letter in a post to inform you that you are eligible for a particular card. If you’re looking to check your eligibility online and get pre-approval for a certain card, you need to provide some basic information like personal information, finance and income, and address details. 

How to get pre-approved for more credit cards?

There are two crucial ways through which you can increase your chances of being pre-approved for more credit cards. The first one is to improve your credit score, the second one is to cut down your existing debt.