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How Does the Credit Card Pre-approval Process Work?

Peter Warden
credit card pre-approval

Credit Sesame explains how the credit card pre-approval process works.

Do you get regular mail shots from credit card companies telling you that you’re “pre-approved” for one of their products? If so, what does that mean? And can you get pre-approved yourself? We’ve taken a sneak peek behind the scenes of the credit card approval process to see what happens and what pre-approval means.

Credit Card Pre-approval

Software giant Oracle once published parts of its manual for the “application suites” (technologies) it sells to credit card companies. And it broke down the very first steps in the credit card approval process:

  1. Pre-approval phase: The credit card service determines if the customer is eligible to apply for the credit card being offered
  2. Credit Decision phase: If the customer is eligible to apply for the credit card, the customer can accept the credit card offer and complete a credit card application. The credit card service then determines if the customer is approved for the credit card

Pre-approval means the credit card company has run some checks on you and has determined you’re likely to qualify for a particular card. Those checks are normally made with one of the Big Three credit bureaus, Equifax, Experian and TransUnion.

Typically, the company will want at the very least to identify you and know your credit score. Most credit card issuers publish an acceptable credit score range for each of their products. And one might pre-approve or pre-qualify you just on your score and street address.

More recently, some third-party companies offer to get you pre-approved for a credit card that suits you well. So, check out how that works.

Credit Card Pre-approval Versus Pre-qualification

There’s no legal or commonly agreed definition of the words pre-approval and pre-qualified. Some lenders use the terms interchangeably. Indeed, some might say pre-qualified in the sense another uses pre-approved — and vice versa.

Probably most lenders view pre-approval as the more rigorous process, with more and deeper checks than pre-qualification. Credit card company Capital One sees it that way and gives an example of its definition in action:

Some pre-qualified card offers could be reserved for those who meet a general credit score range. Other pre-approved offers may target those who meet more specific criteria, like the percentage of on-time credit card payments in your credit history.

So, pre-approval doesn’t mean your new plastic is automatically in the mail the moment you sign up. Whether you’re pre-approved, pre-qualified or just making a fresh application, the lender will likely need to carry out more checks.

Steps in the Credit Card Pre-Approval Process

Chances are, the card issuer to which you applied will first make sure that your address is legit (within the U.S. and not a P.O. box) and that your credit score is within the range required for the card you’ve requested. Those are the early steps in Oracle’s manual.

What happens after that will depend on various things, including how exclusive the card is and how big a credit limit it comes with. For example, if you want a secured credit card (one where you deposit yourself the funds you can use and then “borrow” your own money), the issuer may stop there.

But if you want a black American Express Centurion card, Amex is likely to want to be sure you’re good for it and its high spending power by conducting many more checks.

What to Expect

According to Experian, for most credit cards, the remaining steps in the credit card approval process can include:

  • Pulling your credit report — That reveals your record for making on-time payments and also how large your existing debt burden is. It will also show whether you’ve made lots of credit applications recently (a red flag) and if you have or have had issues, such as delinquent accounts, collections or a bankruptcy
  • Verifying your income and employment — It may be able to do that through your bank account. Often, the card application form you sign includes permission for the card issuer to access your accounts

Nowadays, you can get a near-instant decision if you apply online and your card issuer uses the latest approval technologies. However, expect it to take a week or two for your physical plastic to arrive, although some companies offer expedited delivery.

If you apply by mail or in a bank branch, the whole credit card approval process will likely take a bit longer.

Credit Card Pre-approval and Credit Scores

One of the advantages of pre-approval is that it doesn’t touch your credit score. These initial checks count as “soft inquiries,” meaning they don’t affect your score at all.

However, at some point later, the card issuer will likely make a “hard inquiry,” which does impact your score. That happens when it receives your application.

But don’t worry too much. Typically a score takes only a small hit of a few points for each new application. And you normally see it recover to the same or a higher level within a few months.

How to Influence Pre-approval

You might be able to improve your chances of being pre-approved. Here are some ideas:

  1. Make sure you pay all your bills (but especially credit card ones) on time
  2. Check your credit reports for errors. Then correct them
  3. Keep your card balances low compared to your credit limits. Learn more
  4. Don’t apply to open lots of new accounts over a short period
  5. Don’t close old accounts for no good reason

The better you follow those simple rules, the more likely you are to be pre-approved for a great credit card.


Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.

 

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Published May 20, 2022
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