It’s probably safe to say that you’ve received an offer for a new credit card at some point in your life. Whether they show up in your mailbox or your inbox, these offers can be more than just an attempt by credit card issuers to drum up business. In fact, they can actually be of use to you, even if you don’t end up applying.
Known as a credit card prequalification or preapproval, these preliminary credit card offers can be a great way for you to gauge your odds of being approved for a specific card without requiring a hard pull of your credit. Even if you aren’t actively shopping for or requesting offers for new credit cards, you may find credit card prequalification letters ending up in your mailbox.
How exactly do you become prequalified, and what does it mean for you? Those are questions worth exploring.
What it means to prequalify for a credit card
Being prequalified for a credit card generally means that a lender is fairly confident you’ll be approved for a particular offer if you decide to apply, and it’s their way of trying to bring in more valuable customers. They make this determination based on the information they pull from your credit report and whether or not it meets certain criteria specific to that offer. This doesn’t, however, guarantee that you’ll be approved for a card once you apply.
Getting prequalified usually happens one of two ways: It’s initiated by a credit card issuer, and then the issuer informs you that you’re prequalified. Or it’s initiated by you, usually through the issuer’s website.
Prequalification letter sent by a credit card issuer
Even though direct mail marketing for new credit card acquisitions has decreased over the years from over four billion pieces of mail in 2016 to just over one billion in 2017, according to the Statistical Fact Book from the Data & Marketing Association, you’ve still probably received at least one of these credit card offers in the mail before.
Instead of waiting for consumers to reach out and apply for a credit card, issuers will obtain consumer credit information that meets the criteria for whichever credit card they’re trying to promote. So, for instance, one credit card might require applicants to have a credit score of at least 670. Card issuers will obtain a list from the credit bureaus of consumers with credit scores of 670 and above and use that list to target the offer to those consumers.
This criterion varies by lender, but it can be anything from a range of credit scores to a minimum income level. Just because you received a targeted offer, however, doesn’t mean approval is definite. There are other factors beyond, say, your credit score, that determine your chances for approval, but a prequalification letter can be an indication of which cards you’re likely to be approved for.
Prequalification determination initiated by you
The other way to check if you’re prequalified for a credit card is by initiating the process yourself. Many credit card lenders have a tool on their website for checking whether or not consumers prequalify for any of their cards or current promotions. This process doesn’t take more than 60 seconds to complete and just requires some personal information, such as your name, address, Social Security number, and sometimes your total annual gross income.
Here are a few examples of credit card lenders that offer an online tool to check what you may prequalify for (this list is not exhaustive):
- Capital One
- American Express
- Discover (referred to as preapproval)
- Bank of America
- Credit One Bank
If you aren’t receiving prequalification letters in the mail, that doesn’t mean you don’t qualify for anything. Every credit card issuer has its own way of conducting these inquiries, but if you don’t want to wait, you can always check yourself.
Prequalifying for a credit card is a great first step in determining the likelihood of getting approved. While approval isn’t guaranteed, you’ll at least know where you stand and what credit cards are in your range, should you be in the market for a new one.
It’s important to note that prequalification letters may not be sent out immediately after determining your eligibility. If your credit has dramatically changed in the month or so prior to getting the letter, it would be a good idea to check your credit score again before deciding to apply.
Prequalified vs. preapproved
If you’re convinced you’ve received credit card offers that appear to use the terms prequalified and preapproved — even prescreened — interchangeably, you aren’t mistaken. Lenders’ processes vary, so what one issuer calls prequalified, another may call preapproved. Capital One, for instance, refers to the prequalification process as just that, prequalification, while Discover refers to the same process as preapproval. This lack of uniformity in language among lenders can easily trip up consumers in a process that already has some stress baked into it.
Some argue the two terms are slightly different, and the distinction primarily lies in who initiated the inquiry. For instance, some claim that prequalifying is when you initiate the process and request the inquiry, while preapproval is when a credit card issuer seeks out likely candidates for a credit card. Preapprovals are also argued to be closer to a true approval in this instance, since the credit card issuer reached out to you with an offer.
Regardless of what you call it, the process is used to identify whether you're likely to be approved for a particular offer should you decide to apply. Consider it a soft “yes” — just not a guarantee for approval.
Does prequalifying for a credit card hurt your credit?
Whether it’s initiated by you or a credit card issuer, nothing about the prequalification process affects your credit, since it’s only a soft inquiry. In fact, seeing whether or not you prequalify for a credit card is a smart move to make before committing to an actual application. That way, you can see if you’re a good candidate for a specific credit card.
If you decide to move forward with applying for a credit card, only then will your credit receive a hard inquiry. These hard credit checks do impact your credit score but only by a few points.
The prequalification process is a great, no-risk way to help you determine whether you’re likely to be approved for a particular credit card. It doesn’t impact your credit score, takes virtually no time at all, and can prevent unnecessary hard inquiries that could drop your credit score — even if it’s just by a few points.