What Does it mean to be Pre-Approved for a Credit Card?

by Timothy Lickteig on December 3 2021

‘Pre-approved’ for a credit card means you’ve met a card issuer’s initial eligibility requirements. However, it does not guarantee that you’ll actually be approved for the card. It just acts as a screening process.

Here’s a detailed look at what exactly credit card pre-approval is, how it works, and how to make the most of it.

What Exactly Is Credit Card Pre-Approval?

Credit card pre-approval is a form of marketing that credit card companies use to promote their cards. But they don’t want to promote their cards to everyone. They want to make sure that the offer only goes out to individuals with strong financial credentials.

A credit card lets you spend money on credit extended to you by the credit card company. It’s like taking a loan from the credit card issuer for the amount you spend when you use the card. Pre-approval is the issuer’s way of screening potential applicants to determine whether or not they qualify for a card.

How Credit Card Pre-Approval Works

The pre-approval process involves checking potential customers’ credit scores by doing a soft credit pull. This soft inquiry only reveals your credit score without disclosing any details of your credit history. Every credit card company has a minimum credit score requirement to qualify for their card, f your credit score meets this minimum requirement, you are considered ‘pre-approved’. Only a soft credit inquiry is done at this stage and does not impact on your credit score.

Individuals who pass this preliminary screening receive a mailer from the credit card company informing them that they’ve been pre-approved. The notification is accompanied by an invitation to apply for a card and includes details of the terms, conditions, and credit card rewards details. This letter is not a firm offer, neither is it a guarantee of approval. It is just an invitation to apply

If the offer sounds appealing and you’re interested in the card, you will then have to submit an application. As part of the application, you’ll need to provide information about your income, monthly rent or mortgage, and other personal and financial details. It’s only after you submit your application that the card issuer will do a hard credit inquiry. This is to dig deeper into your payment history and other financials. This hard inquiry does impact your credit score slightly.

Final approval is based on your credit report and the financial details you’ve submitted. You’ll receive a letter from the credit card company informing you about their final decision. If you’re approved, you’ll receive the card in a few days. If you’re denied, you’ll receive an adverse action notice explaining why you were turned down for credit.

Do You Need Credit Card Pre-Approval to Get a Credit Card?

Pre-approval is not required to apply for or get a credit card. As we said earlier, this is just a marketing tactic used by card companies to promote their card to creditworthy customers who may not have heard about them.

If you are looking for a credit card, you can apply for one directly from the card company’s website. Application procedures may vary slightly from one company to another. Some allow web visitors to check if they’re pre-approved for a credit card on their website.

Proactively checking to see if you’re preapproved for a credit card is a good idea. This allows you to be more selective about which cards you apply for. Every application you submit will trigger a hard credit inquiry. Applying only for cards you qualify for will limit the number of hard credit pulls and prevent unnecessary damage to your credit score. This is important as a low score can make it more difficult to get approved for future loans or credit cards.

Should You Accept a Card If You’re Pre-Approved?

Whether or not you accept depends on your needs. You should not jump into submitting an application without doing your own homework as every credit card comes with its own set of fees, terms, and rewards. It’s important to take time to go through all of these aspects in detail and compare them with other cards. Are the fees higher or lower than other cards? What about the rewards – are they something you’ll use? You don’t want to apply to a card that offers hotel stays if you don’t have plans to travel. Consider all of these aspects and only apply if the card meets your needs.

After you receive a pre-approval letter and before you apply, it’s also a good idea to check the company’s website. Every card company offers different types of credit cards. Look through the different cards they offer through their website as you might just find a card that offers something better suited to you than the original offer you received in the mail.

The Preapproved Credit Card Offers Opt-out: Should You?

You can opt out of receiving prescreened offers but it’s best not to. Getting pre-approved offers gives you several insights into your financials. It lets you know that your credit is good enough to pass the initial step towards getting a card. If your credit isn’t good, you wouldn’t receive them in the first place. Secondly, it gives you some insight into the potential terms and rewards you can receive if you do decide to apply for a card. It also lets you know about some fantastic offers that you may not otherwise have known about.

Credit card companies tend to offer the best terms and benefits through their pre-approval offers. Your offer may include a more competitive rate, lower fees and more relevant benefits. If it sounds better than your current card, it may be worth applying. If it isn’t better than your current card, you can simply ignore it. Getting pre-approved for a credit card ultimately gives you the power of choice. There are a lot of benefits without any downsides. Even though you can opt out, it’s advisable not to.  

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