What Is Credit Card Pre-Approval?

Bank approved stamp
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Getting credit card pre-approval offers in the mail can be exciting, especially if it's an offer for a credit card with a low interest rates or an awesome rewards program. But, don't get too excited. If you've ever responded to a credit card pre-approval offer, then you already know the truth about pre-approved credit card offers: that you're not really pre-approved. That's right. You can still be denied for a credit card that you've been "pre-approved" for.

What Does Pre-Approved Mean?

Credit card issuers have a screening process to figure out which consumers might be a good fit for a particular credit card. In the screening process, the card issuer asks the credit bureau for a list of consumers who fit certain criteria, like those who have a certain credit score or have a certain number of accounts. If you meet the criteria, your name goes on the list and the credit card issuer sends you a pre-approval offer. Think of it as an invitation to apply for the credit card rather than a firm offer for the credit card.

Pre-approval doesn't affect your credit score, because the credit card issuer hasn't done a hard pull on your credit report. However, if you decide to apply for the credit card, the credit card issuer will do a credit check that will result in a hard inquiry. The inquiry that comes from your application could hurt your credit score depending on the other information in your credit report.

How to Find Pre-Approved Credit Cards

If you haven't received a pre-approved credit card offer in the mail, it doesn't necessarily mean you don't qualify for one.

Some credit card issuers make it easy to find out whether you've been pre-approved for a credit card. You'll typically enter only your basic information—your name and last four digits of your social security number—to see which credit cards, if any, you may qualify for.

These pre-approval checks typically only do a soft pull on your credit report which means it won't affect your credit score unless you ultimately decide to apply for a credit card.

Proactively checking to see if you're pre-approved for a credit card can save you the trouble of applying for credit cards that are "out of your league" so to speak. This is important since new credit inquiries can affect your credit score and make it more difficult to get future applications approved.

Why Credit Card Pre-Approval Offers Aren't What They Seem

Even after receiving a pre-approved credit card offer, you still have to make an application, just as if you'd found the credit card on your own. Once you apply, the credit card issuer will take a closer look your credit history and the information on your application to decide whether you actually qualify for the credit card.

In the best case scenario, you're approved for the credit card with the same terms that were listed in the offer letter. A little less satisfying: you may be approved, but with less favorable terms than what were listed on the offer. For example, you may be approved for a higher interest rate or shorter promotional period. A worse scenario is possible: you could be denied for the credit card completely.

Free Credit Scores After an Unfavorable Decision

If you're denied for a pre-approved credit card (or any credit card) or you're approved but for less favorable terms than you were offered because your credit score didn't meet the criteria, the card issuer will send a free copy of your credit score used in the decision.

You may also be entitled to a free credit report if you're denied because of information in your credit report. You'll have 60 days to request this free credit report.

You can use this opportunity to figure out what's hurting your chances of being approved and work to improve your credit score so if you decide to apply for a credit card in the future.

Don't Forget to Shop Around

The pre-approved credit card offer you receive may not be the best offer out there. Before you respond, go online to check the credit card's most recent offers. You may find something better than the offer you received in the mail. Shopping around can help you make sure you're getting the best deal. You may find a better credit card with another credit card issuer.

Compare the credit cards you qualify for based on rewards, perks, interest rate, and fees.

Stop Pre-Approved Credit Card Offers

If you no longer want to receive pre-approved credit card offers, perhaps because you receive too many of them, you can limit the offers you receive by mail. Simply opt out at OptOutPrescreen.com. You can opt-in again at the same website if you previously opted-out.

Opting-out line will stop many pre-approved offers—the ones based on pre-screenings through the major credit bureaus. However, you may still receive offers from companies you already do business with or from companies who got your information from somewhere besides the credit bureaus.

You can still use the major credit card issuers' online pre-approval tools to shop around for credit cards when you're ready to apply for a new credit card. This way, you're in the driver's seat when you're scouting for credit cards on your own.

Article Sources

  1. FDIC. "Credit Card Activities Manual: Chapter V - Marketing and Acquisition," Accessed Nov. 14, 2019.

  2. FTC Consumer Information. "Prescreened Credit and Insurance Offers," Accessed Nov. 14, 2019.

  3. Consumer Financial Protection Bureau. "What's a Credit Inquiry?" Accessed Nov. 14, 2019.

  4. American Express. "Check for Offers," Accessed Nov. 14, 2019.

  5. Office of the Comptroller of the Currency. "Credit Card Lending," Page 17. Accessed Nov. 14, 2019.

  6. CFPB. "CFPB Consumer Laws and Regulations: FCRA," Page 1. Accessed Nov. 14, 2019.

  7. CFPB. "CFPB Consumer Laws and Regulations: FCRA," Page 30. Accessed Nov. 14, 2019.