Pre-approved credit card offers are one way that credit card companies attract new customers. These offers are typically sent by mail to potential cardholders who meet some minimum criteria for approval.
If you’ve ever received one of these offers, you may be wondering how it impacts your credit score or what to do next. Before you do anything, here are a few things that you should know about pre-approved credit card offers.
What are pre-approved credit card offers?
Pre-approved credit card offers are simply a form of promotional and marketing material. The purpose is to encourage you to apply for the credit card that is being offered. Getting a pre-approved credit card offer in the mail, by phone, or email does not mean that you have been approved. It simply means that based on some criteria, you are likely to be approved. In most cases, this is simply having a minimum credit score. You will still have to complete that application process to be approved for the advertised credit card.
How to get pre-approved for credit card offers
Credit card issuers and other lenders have the ability to access information on your credit report. Consumer reporting companies, or credit bureaus, provide a list of qualifying persons who meet the company’s requirements for pre-approval. Obtaining this information is considered a soft inquiry on your credit report.
In general, if you maintain a good credit score, it’s likely that you will receive a pre-approval offer. You don’t have to wait for an offer to be pre-approved for a credit card. Most credit card companies allow you to check to see if you are pre-approved for their credit cards by completing a brief application on their website. By filling out a short form with your social security number, information about your income, employment, and financial obligations, you can quickly find out if you qualify.
A pre-approval isn’t necessary to apply for a credit card, though. You can simply apply for a card directly on a card issuer's website.
Do credit card pre-approvals impact your credit score?
When a credit card issuer does a soft inquiry on your credit report to check for pre-approval, it does not negatively affect your credit score. These types of credit checks also do not lower your credit score.
However, when you actually apply for a credit card, a hard inquiry is made. This does lower your credit score. Because of this, you want to limit the number of hard inquiries made on your credit. Before applying for a credit card, check to see if you are pre-approved on the card provider's website. This will help you avoid having a hard inquiry that lowers your credit score for a card that you don’t qualify for.
Pre-Qualified vs. Pre-Approved: What’s the difference?
Pre-qualified and pre-approval are often used interchangeably but do have one slight difference. A pre-approval offer is initiated by the credit card company. Contrarily, when you, the consumer, initiate the inquiry and receive an offer it is referred to as a pre-qualified offer.
What to do if you get pre-approved for a credit card
If you get pre-approved for a credit card, the first thing that you should do is decide if a credit card is right for you. You may not have been thinking of applying for a credit card prior to receiving the promotion, so don’t feel pressured to apply. If a new credit card isn’t right for your financial situation, simply toss the offer away (securely).
If you are in the market for a new credit card, follow the instructions provided in the offer to apply. Remember, applying requires a hard inquiry on your credit. So be sure that you are truly interested in applying.
What to consider before applying for a credit card
A credit card can be a big financial commitment. Before applying for one, there are a few things that you need to take into consideration.
The annual percentage rate (APR) is the interest rate that you will pay on any balance that you carry from month to month. The higher the rate, the more money you’ll have to pay above your principal balance amount. Credit card interest rates can get extremely high, so it’s important that you know this rate before applying for a card.
Some credit card companies charge annual fees, foreign transaction fees, and late fees. These are charges that you should be aware of and prepared for as a potential cardholder. You don’t want to be blindsided by additional fees on your bill. Take the time to review these fees beforehand so that you can learn how to avoid them.
Credit card companies are always competing on incentives to attract new customers. Some offer cashback incentives, while others may offer travel points. Take these into consideration when you’re deciding which credit card offer to apply for. Ideally, you’ll want to apply for a card with an incentive that’s advantageous to you.
Your current debt load
A credit card should always be handled responsibly. Without a proper financial plan to manage your money, you can easily find yourself in mounds of credit card debt. If you already have a significant amount of debt, applying for a credit card may not be the best option for you. Instead, work to pay off your debt first.
Final thoughts on pre-approved credit card offers
Remember that getting pre-approved for a credit card does not guarantee that you will be approved or that you even need to apply. It is simply an offer to apply that you can choose to accept or decline.
If you no longer want to receive these offers, you have the legal right to opt-out of this marketing at OptOutPrescreen.com. Note that it can take up to 60 days before you stop receiving these offers.
Ultimately, credit cards can be used responsibly to build your credit. If you’re interested in learning more about building or improving your credit, enroll in our free credit course!