Credit Sesame discusses credit card pre-approval and pre-qualification.
Many credit card ads offer the chance to get pre-approved or pre-qualified. Some offers directed at you specifically may even say you’re already pre-approved. But what does this really mean? And is pre-approval a good thing?
This article will explain credit card pre-approval, and how it can work to your advantage.
What Is Credit Card Pre-approval?
Credit card pre-approval and pre-qualification are essentially the same thing. Each is an informal process for assessing the likelihood of your being approved for a specific credit card.
Note that this is different from mortgage pre-approval and pre-qualification, where pre-approval is a more formal process resulting in a firm commitment from a lender.
When it comes to credit cards, the terms pre-approval and pre-qualification are used interchangeably. In either case, it’s a less formal process than actually applying. It can give you an indication of what the results would be if you did apply.
When you apply for a credit card, you have to provide information about your income and credit usage. In addition, the credit card company will almost certainly check your credit history.
They would then make a decision based on a combination of those factors.
With pre-approval, you may be able to provide your information in summary form. Also, rather than having the credit card company do a credit check, you can simply provide your approximate credit score.
Based on this information, you can get an indication of whether you’re likely to get approved for a given card. You might even be given an estimate of what terms you’d qualify for, such as the interest rate and credit limit.
However, pre-approval is not a commitment. It’s just a general indication of your likelihood to qualify for a given credit card based on a surface look at your financial status. When you actually apply, a deeper dive into your finances might give a credit card company reason to reject your application.
Why Is Credit Card Pre-approval a Good Idea?
So pre-approval isn’t a firm “yes.” It’s more of a “maybe,” or at best a “probably.” If it doesn’t give you a definite answer, is it worth it?
There are a few reasons why it can be worth your while to get pre-approved:
- Pre-approval can focus your credit card search. Credit card features and terms differ greatly, so it’s wise to shop around. You can do that more efficiently if you don’t bother researching cards you aren’t likely to qualify for.
- Pre-approval can save you time. Filling out a credit card application typically takes more time than providing the information needed for pre-approval. Getting pre-approved can save you from wasting time filling out applications that are likely to get rejected.
- Pre-approval won’t affect your credit score. If you actually apply for a credit card, it’s likely to require what’s known as a hard inquiry into your credit history. A hard inquiry shows up on your credit record. While this may have a relatively minor impact, it could make a difference if you have to apply for a few credit cards before you get approved, or if your credit status is borderline to begin with.
How Can You Get Pre-approved for a Credit Card?
A variety of credit card companies offer a pre-approval process online. The information they request differs, but generally speaking expect to provide identifiers such as your name, date of birth and Social Security number. You might also have to provide some basic financial information.
Based on a preliminary check of your background, you’ll get an indication of which of that company’s credit cards you’d be likely to qualify for.
This is useful because it will indicate whether it’s worth going through with the application process. Also, since issuers may offer a variety of credit cards with different terms and qualifying standards, pre-approval might help you identify which would best fit your situation.
You Don’t Have to Limit Yourself with Pre-approval
Pre-approval can help you identify which of a credit card company’s offers you might qualify for. However, it won’t tell you anything about offers from other companies.
To get the best terms, it’s wise not to limit yourself to considering just one credit card company.
One way to shop around would be to go through the pre-approval process with multiple credit card companies. A drawback is that this might be time-consuming. Also, you might find yourself bombarded with credit card offers once you provide your information to all those credit card issuers.
An alternative is to use a tool from a more neutral source which can compare your information with the qualifying standards from multiple card issuers. An example is the Sesame Connect tool. This allows Credit Sesame users to see their chances of qualifying for a variety of credit cards, based on the experience of users with similar financial profiles.
The results don’t mean any credit card company has pre-approved you. Instead, it can help you narrow your search to cards you’re likely to qualify for, while still considering offers from multiple companies.
Whichever way you approach credit card pre-approval, it can be a useful step to take before you actually apply for a credit card.
Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.