What is Credit Card Pre-Approval?

Bank approved stamp
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Getting those 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. 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.

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, which you'll have to request within 60 days. You can use this information to improve your credit score so if you decide to apply for a credit card in the future, you'll have a better chance of being approved.

Don't Forget to Shop Around

Don't take for granted that the offer you received is 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.

Shop around. You may even find a better offer with another credit card issuer. That goes for balance transfer, low interest rate, and rewards credit cards, as well.

Stop Pre-Approved Offers

You can limit the number of pre-approved credit card offers you receive by opting out at optoutprescreen.com. You can opt-in again at the same website if you previously opted-out. That 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.