What Is Credit Card Preapproval?

Bank approved stamp
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Getting credit card offers in the mail can be exciting, especially if there's an offer for a credit card with a low interest rate or an awesome rewards program. But, don't get too excited. If you've ever responded to a credit card offer, then you might already know the truth about so-called "preapproved" offers: You're not yet actually approved. That's right—you are not guaranteed approval for the credit card. You can still be denied even after you've been "preapproved" for it.

What It Means to Get a Credit Card Offer in the Mail

When you receive a credit card offer in the mail, it means that the company prescreened you for one of its cards and has determined that you may be a good fit to apply. A credit card company prescreens potential cardholders based on data it purchases from credit bureaus, using it to find consumers who fit certain criteria, like those who have a certain credit score or have a certain number of accounts. It may then mail you promotional and marketing offers, telling you that you are "preapproved" or that you "prequalify" for one of its cards, but that's not exactly what it sounds like. You've only been prescreened. Think of it as an invitation to apply for the credit card rather than a firm offer for the credit card.

After you receive the prescreened offer in the mail, you can then submit an application for the credit card to determine if you are approved or not. This will cause a hard pull on your credit and may affect your credit score. There is still the chance that you'll be denied, too.

What Does Preapproval Mean?

Preapproval, on the other hand, means that you may qualify for the credit card, but it's not guaranteed. It is based on information that you proactively submit to the credit card company. You still need to submit an application for the credit card in order to be officially approved.

During the preapproval process, required information often includes your name, address, gross annual income, monthly rent/mortgage payment, Social Security number, and more. Once you submit the form, you'll find out if you've been preapproved for the credit card.

Prescreens and preapprovals for credit cards do not affect your credit score.

Preapproval 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.

Though you may be preapproved, you can still be denied the credit card. This may happen because once you officially apply for the credit card, the company will look at a full credit report to determine if your credit history still meets its criteria for the card. If there is something negative on your report that didn't show up in the preapproval process, you may be denied.

How to Find Preapproved Credit Cards

If you haven't received a credit card offer in the mail, it doesn't necessarily mean you're not the right fit for one. You can go to a credit card company's website and fill out a form that will then tell you if you're preapproved.

Some credit card issuers make it super easy to find out whether you've been preapproved for a credit card on their websites. You'll typically enter only your basic information to see which credit cards, if any, you may qualify for.

These preapproval 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 preapproved 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.

Which Way Is Best When Applying for a Credit Card?

Following up on the prescreened offer you received in the mail and applying for the credit card results in a hard credit inquiry, which can potentially affect your credit score. While the prescreened offer alerts you to the fact that the credit card company thinks you're in good financial standing, it does not mean that you automatically qualify for the card. You must apply for the card in order to know whether you are approved or not.

Proactively getting preapproved for a credit card gives you the chance to see what terms you could potentially receive if you were to officially submit an application for a credit card. Additionally, the preapproval process does a soft inquiry, which doesn't affect your credit score. Since you'll get a snapshot of what could happen if you applied, it gives you the chance to decide whether you want to move forward with that credit card or not, before even submitting an official application.

What Happens After You Apply?

Regardless of if you received a credit card offer in the mail or sought out preapproval on your own, you still have to fill out an application. Once you apply, the credit card issuer will take a closer look at 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 initial prescreened offer letter or during the preapproval process. A little less satisfying: You are approved, but with less favorable terms than what the prescreened offer or preapproval listed. For example, you are ultimately be approved for a higher interest rate or a shorter promotional period. A worse scenario is possible still: You could be denied for the credit card completely.

Free Credit Scores After an Unfavorable Decision

If you're denied for a credit card, or you're approved but for less favorable terms than you were initially 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 credit card offers you receive in the mail may not be the best out there. Before you apply for a card after receiving that prescreened offer, go online to check the credit card's most recent offers, plus those from other issuers like it. 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.

Compare the credit cards you're interested in by looking at their rewards, perks, interest rates, and fees. Once you find the card you want in your wallet, see if you can submit a preapproval form to determine whether you may qualify for it or not.

How to Stop Receiving Credit Card Offers in the Mail

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

Opting-out will stop many offers—the ones based on prescreenings 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 preapproval 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. Federal Trade Commission Consumer Information. "Prescreened Credit and Insurance Offers." Accessed Dec. 9, 2019.

  2. FDIC. "Credit Card Activities Manual: Chapter V - Marketing and Acquisition." Accessed Dec. 9, 2019.

  3. Consumer Financial Protection Bureau. "What's a Credit Inquiry?" Accessed Dec. 9, 2019.

  4. Discover. "Pre-Approval Form." Accessed Dec. 9, 2019.

  5. Consumer Financial Protection Bureau. "What Is a Prescreened Credit Card Offer?" Accessed Dec. 9, 2019.

  6. American Express. "Check for Offers." Accessed Dec. 9, 2019.

  7. Office of the Comptroller of the Currency. "Credit Card Lending." Page 17. Accessed Dec. 9, 2019.

  8. Consumer Financial Protection Bureau. "CFPB Consumer Laws and Regulations: FCRA." Accessed Dec. 9, 2019.

  9. Consumer Financial Protection Bureau. "CFPB Consumer Laws and Regulations: FCRA." Page 30. Accessed Dec. 9, 2019.

  10. Consumer Financial Protection Bureau. "Can I Make Issuers Stop Sending Me Credit Card Offers in the Mail?" Accessed Dec. 9, 2019.