The pros and cons of getting pre-approved for a credit card

Getting Pre-Approved for a Credit Card: A Smiling Bank Representative Assists with Completed Credit Application

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Credit Sesame discusses why getting pre-approved may or may not be a good thing.

Are you eager to get a credit card but worried you might get rejected after applying? Do you want to take advantage of special rewards a certain credit card provides? Perhaps you should consider applying for a card you’ve already been “pre-approved” for. Pre-approval means that you seem to fulfill many of the criteria required for approval. However, pre-approval does not guarantee approval.

Nevertheless, a pre-approved credit card has pluses and minuses. You should consider the benefits and drawbacks of pre-approval, and what happens if you are pre-approved but ultimately rejected for the card.

Understanding what getting pre-approved for a credit card means

Credit card pre-approval is not something you can usually apply for on your own. Instead, pre-approval typically refers to credit card marketing offers you may receive by mail, email, or otherwise, often from a bank or credit card provider you already do business with or one of their affiliated partners. Pre-approval indicates you’ve been prescreened based on particular criteria, such as your payment history and credit rating.

If you receive a credit card offer for which you’ve already been “pre-approved,” it means that the credit card issuer has already initially vetted you and determined you are a good candidate for the card. Lenders prescreen consumers by requesting a soft inquiry to check credit and determine who qualifies.

Good candidates for getting pre-approved for a credit card

You may be a worthy prospect for receiving a credit card pre-approval offer if you have a good credit history and an established record of managing credit cards.

“When you have one credit card, companies can very easily prescreen you and send you offers for other cards throughout the year,” he says.

Carter Seuthe, CEO of Credit Summit, says “individuals who have not applied for credit very frequently, those with at least a  good or average credit score, and individuals who are most likely to use the credit card for travel and/or groceries often receive pre-approved credit card offers.”

Good candidates for accepting a credit card pre-approval offer include those with higher credit scores who can pay the annual fee, if any, and those who are offered promotions like a 0% introductory APR for a certain period, per Lyle Solomon, a financial expert and attorney with Oak View Law Group.

“Using a no-interest card can allow you to pay off your pre-existing high-interest accounts and save on interest while paying off the new card’s balance,” Solomon notes.

The benefits of getting pre-approved for a credit card

The primary advantage of receiving a pre-approved credit card offer is that it saves you time and effort.

“You don’t have to go out searching for the right new credit card to apply for. Instead, lenders come to you, hopefully with good offers,” Solomon adds.

Additionally, if you have a poor credit score, accepting a credit card pre-approval and eventually getting approved for that card can help boost your credit score.

“Also, lenders typically provide better or lower interest rates when they approach consumers with credit card promotions. These pre-approval offers are usually better than what you would find when shopping around for a card on your own you are not pre-approved for,” explains Solomon. “Plus, many times, pre-approved credit cards offer special bonuses and rewards.”

Lastly, as mentioned, pre-approval only results in a soft credit check, which means your credit score won’t take a ding.

The disadvantages of getting pre-approved for a credit card

Of course, accepting a credit card pre-approval offer has its downsides, too.

“You’ll have the responsibility of owning yet another credit card, which can be irresponsibly used if you are not careful,” Hill cautions. “That’s why it’s best to be cautious of pre-approval offers and only initiate the application process when you can afford and budget for the new card and its use.”

In addition, “if you’re not careful, you could end up with a critic card that has a higher interest rate than you anticipated,” says Zach Larsen, a small business owner and finance/investment expert.

Furthermore, you may be limited in the number of cards you can apply for in the future if you’ve already been pre-approved for a particular card, Larson continues.

What happens if you are ultimately not approved for the card?

Just because you are pre-approved for a specific credit card doesn’t mean you are guaranteed to be approved and receive the card. It’s important to be aware of this possibility.

“It most commonly happens because the lender found something negative when conducting a hard search of your credit history that was not automatically sensed in the prescreening,” Seuthe says.

For instance, perhaps adverse changes in your credit report occurred between the time you received the offer and when the credit card company conducted the hard inquiry.

“Or, maybe you moved or had your name changed. Possibly you racked up charges on other accounts, made numerous inquiries to your credit, increased your debt, or made late payments, too,” Solomon points out.

If you are rejected after formally applying for a pre-approved credit card, you can strive to improve your credit and reapply.

“Call the card issuer’s reconsideration line or try applying for a different credit card. But it’s best not to apply for a different card soon after getting rejected – give it a little time,” recommends Solomon. “This is because multiple hard inquiries in a short period suggest to lenders and credit card issuers that you may be short on cash or are getting ready to rack up a lot of debt. Consequently, you might get labeled as a high-risk candidate, making it harder for you to get credit in the near future.”

Is applying for a pre-approved credit card worth it?

If you are looking to build stronger credit, don’t have too many credit cards already, are financially healthy enough to pay off your credit card debt responsibly, and can benefit from certain rewards promised by a credit card pre-approval offer, applying for and getting a credit card you are already pre-approved for can be a smart move.

That can be especially true if you currently have high-interest credit card debt and the pre-approved credit card provides a zero-interest introductory period and allows you to transfer a balance from a high-interest credit card.

“The advantages of a pre-approved credit card offer typically outweigh the disadvantages. With a pre-approved credit card, you know exactly how much credit you have available to you, which can help you budget and avoid overspending. Additionally, pre-approved credit cards often come with special offers and perks that can save you money,” advises Larsen.

Just be sure to do your homework and weigh the pros and cons carefully before pursuing a pre-approved credit card. Remember that if the application is not successful this impacts your credit score negatively.

“Carefully read and understand the terms and conditions of getting pre-approved for a particular card before applying,” adds Solomon.

You may also be interested in:

Does Credit Card Pre-Approval Mean You Will be Approved?

How Does the Credit Card Pre-approval Process Work?

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

Erik J. Martin
Erik J. Martin is a Chicago area-based freelance writer and public relations expert whose articles have been featured in AARP The Magazine, Reader’s Digest, The Costco Connection, The Chicago Tribune, Los Angeles Times and other publications. He often writes on topics related to real estate, business, technology, health care, insurance, and entertainment.

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