Credit Sesame discusses credit card pre-approval and whether it gives you better odds of approval.
When you receive a credit card pre-approval through the mail, a text or online, should you apply? Does “pre-approved” mean better odds of approval?
Maybe, but not always. Pre-approved offers are marketing tools for credit card issuers to promote their products. Here are a few things to know about pre-approved offers:
- Other names for these offers include “pre-screened,” “pre-selected” and “pre-qualified” credit cards.
- A “special” pre-approved offer may not be that special — you might find better deals.
- Approval is likely but not guaranteed.
- A pre-approved offer is an invitation to apply for credit. You must still complete an application.
What exactly is a pre-approved offer? What are the pros and cons of pre-approved offers? What to do when you receive pre-approval?
How Does a Pre-approved Credit Card Offer Work?
Credit card companies decide what sort of customers they want for each type of card they issue. A card for students may not require previous credit or a credit score at all. A card for people looking to re-establish credit usually has a low minimum credit score, while a premium balance transfer or rewards card generally requires a high score, solid income and excellent credit history. Credit card companies prescreen thousands of people to find those most likely to qualify for a particular card. Then, they send a pre-approved offer and invite consumers to apply.
How do credit card companies find those consumers? They might pre-approve existing customers in good standing. They could conduct a limited credit review (called a “soft” credit pull) of prospective customers. Or they could buy a list of prescreened consumers from Experian, Equifax or TransUnion — for instance, a list of people on the West Coast with FICO scores over 700 and no late payments in the last two years.
What does pre-approval actually mean? If you receive a pre-approved offer, you still have to apply and your offer is not guaranteed. But if approved, the card issuer has to give you the benefits and terms listed in the initial offer. Notice, however, that most offers show a range of interest rates. Expect to get the lower interest end of the range if you’re highly qualified, and the higher interest end if you are less qualified.
How to Apply for a Pre-approved Credit Card
You’ve received a pre-approved offer and determined that it’s a good deal. What’s next? How do you take advantage of better odds of approval?
Many pre-approved offers come with a code for you to use if you decide to apply. Others provide a link to their application. (As with all unsolicited offers, make sure that the link goes to a reputable and genuine site. You can see where a link goes by hovering over it without clicking.)
You need some information at hand to complete the application. Most online card applications require:
- Full legal name.
- Social Security Number (SSN).
- Mailing address.
- Gross (before tax) annual income.
- Employment status (employed, unemployed, self-employed).
- Employer phone number or proof of self-employment.
- Monthly housing cost (rent or total mortgage payment including principal, interest, tax and insurance).
- Phone number.
The “soft” credit pull that goes into a pre-approved credit card offer does not impact your credit score. But to proceed with your application, the credit card company makes a “hard” inquiry. Credit reporting agencies log hard inquiries and they cause your credit score to drop a few points.
Credit card companies process applications electronically, and most of the time, approvals or denials happen in minutes. However, some card issuers can take as long as a week or two. And it takes a week or two to get your new credit card following credit approval.
Causes of Denial After Being Pre-approved
While being pre-approved does give you better odds of approval, it’s not foolproof. There are three main reasons your application might be declined:
- Your credit rating has degraded since you were prescreened. Credit scores change constantly. If you apply for new credit, miss a payment or charge a large purchase, your score drops. And when you make on-time payments, consolidate debt or pay off a balance, your score rises. If you were borderline when screened, you might have slipped below the minimum credit score by the time you apply.
- Your income is too low. Credit reports do not show income, so the card issuer doesn’t know your earnings until you apply. If your debt payments are too high for your income or you don’t meet a minimum income requirement, you won’t get your card.
- Other policies. Some credit card company policies result in denial even if your credit score is high and your debts are low. For instance, it may alarm a credit card company if you have opened up a lot of new accounts or have many recent inquiries. Or if you already have several cards with them and your balances are increasing.
If the company declines your application, it must issue an Adverse Action Notice providing the reason for denial. You can then address the reason and apply again or find a card that’s a better match.
How to Get Pre-approved Credit Card Offers
What if you are looking for a credit card but have not received any pre-approved offers? Don’t feel bad and don’t worry. Many credit card companies allow you to pre-qualify online without a hard credit inquiry. You can generate your own offers by completing an application for pre-qualification online. Make sure that you check the box stating that you want to apply for pre-qualification only. Verify that no hard inquiry will be generated. Otherwise, you’re completing an application for credit, which drops your credit score a few points.
In addition, before applying, make sure that the card is one that caters to consumers with credit scores in your range. Credit Sesame helps you search for and compare credit cards for people with your credit rating. Choosing a card with better odds of approval helps avoid unnecessary inquiries on your credit report.
How to Opt Out of Pre-approved Offers
Not everyone wants to hear from credit card companies. If you’re trying to avoid temptation or just hate junk mail, you can opt out of receiving prescreened credit card offers.
Simply visit OptOutPrescreen.com and choose to stop receiving offers for five years or even permanently. You can always change your mind and opt back in later. Note that opting out only stops creditors from sending you prescreened credit card offers. You might still receive advertisements or invitations to apply without pre-approval.
Receiving prescreened prime credit offers can be a clue about your desirability as a customer, and proof that efforts to increase your credit score are working. You’re not required to accept these offers or take on more credit than you need. But it’s always nice to be wanted.
If you found this discussion around better odds of approval for credit card applications useful, you may also enjoy:
- The pros and cons of getting pre-approved for a credit card
- Getting Pre-Approved for a High-End Credit Card Can be Difficult
Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.