“Congratulations, you’ve been preapproved!” Have you ever seen a credit card offer like this show up in the mail?
Before you act on unsolicited credit offers that show up in your mailbox or email inbox, it’s a good idea to understand what a preapproved credit card offer is, what preapproved means, and how you should respond.
Continue reading to learn all about preapproved credit card offers and whether you should respond or drop it in the shredder.
A preapproval means that the credit card company has taken a brief look at your credit profile and, based on the results, think you could be a good customer for the credit card.
Put another way, a prescreened offer is an invitation to apply for a credit card based on what a lender has seen on a version of your credit report.
If you have a good to excellent credit history, for example, a long list of credit card companies may be willing to offer you a card. Before you fill out a formal application for review, the credit card company may preapprove you for one of its cards.
It’s important to understand that preapproval does not guarantee you will be approved if you apply for that credit card.
Once the financial institution does a hard inquiry after you apply and is able to more thoroughly review your credit application, credit report, and other financial information, it may decide you don’t qualify for the card after all.
The preapproved offer also doesn’t mean you are getting any special offer that the card issuer wouldn’t offer other prospective customers with similar credit. However, if you see an offer you like and decide to apply, you have a fairly good likelihood of getting approved.
To preapprove people for credit cards, the credit card issuers pay to get access to credit information, typically from a major credit reporting company like Experian, TransUnion, or Equifax.
When creditors access your information for a preapproval offer, it is considered a soft credit card inquiry, which doesn’t impact your credit score.
You don’t have to be preapproved to get a credit card. Getting many preapprovals doesn’t necessarily mean anything good or bad for your finances. Preapproval is used as a highly-targeted and often effective way of advertising new credit cards to potential consumers.
While they could mean something very different when looking for a mortgage, prequalified and preapproved are often used interchangeably for credit cards.
It is possible that some card issuers would use the terms in a slightly different way. Preapproval could mean a borrower has been more thoroughly vetted than prequalified. But in general, you shouldn’t worry too much about one compared to the other if you are considering opening a new credit card.
Remember, just because you’re preapproved or prequalified doesn’t mean you have to sign up for the card. It just means you likely have a credit score, payment history, or meet other criteria that make you a desirable customer for the credit card company.
In general, you should only accept a preapproved credit card offer if it is a credit card you would have wanted to sign up for anyway.
If the card’s benefits, rewards, rates, or other terms are appealing and make sense for your financial goals, then consider taking the offer. But if your mailbox is regularly overflowing with credit card deals, you should probably pass more often than you say yes.
While getting preapproved for a credit card doesn’t hurt your credit score, applying for a credit card generally leads to a hard credit inquiry, which can slightly lower your credit score.
It’s worthwhile to get an inquiry for a credit card that you really want, but signing up for too many cards in a short period of time can signal that you’re a high-risk borrower and could have a bigger negative result for your credit.
If you decide to sign up for a new credit card, it’s important to keep your balance low and always pay on time if you want to build or maintain a good credit score.
Paying your balance in full by the due date ensures you will never pay any interest, which is a good habit for credit card users to follow.
As mentioned above, getting preapproved isn’t a guarantee that you’ll be approved for the card when you formally apply.
Preapproval means you could be a good fit, but the lender will likely want to conduct a more thorough review of your credit and ability to pay back what you borrow before issuing a new card.
If you have high credit card balances, a history of late or missed payments, bankruptcy, or any other types of legal judgments, you may be turned down for a credit card. Learn more about getting a credit card after bankruptcy.
The lender will also likely look at your income compared to your current debt and the proposed credit line to ensure you are likely to pay your card as agreed.
If anything has happened to change your credit report since the preapproval offer was determined, you could also have seen a change in credit conditions that take you outside of the lender’s preferences. Learn how to read your credit report and check it periodically.
You could also be approved for a lesser offer. If you find that you struggle to get approved for a traditional credit card, a secured credit card, where you make a deposit equal to your credit limit, could be a good choice when establishing or rebuilding credit.
There is no guarantee that anyone will be approved for any specific credit card in advance. The only way to know for sure is to apply. But you can do some research that may give you insights into how likely you are to be approved.
If you have a specific credit card in mind, you may find the card’s credit requirements online, which can help you decide if it makes sense to apply.
If you are tired of those preapproval offers showing up in the mail for any reason, you have some power to stop them. Many credit card companies honor an opt-out request you can file online.
The main website to opt-out of preapproved offers is optoutprescreen.com. This is the official website of the major credit bureaus. You can opt-out from specific types of offers, choose between a temporary or permanent opt-out, and manage your opt-out preferences there.
You shouldn’t have to pay for any opt-out service. Anyone that tries to charge you to opt-out of preapproved offers is likely a scammer. Because preapproval offers don’t cost you anything, you shouldn’t spend any money stopping them.
If you meet eligibility requirements for the Self Visa® Credit Card, you don’t have to worry about applying and getting approved or denied. Instead, the Self Visa® is a secured credit card that is available to any Self Credit Builder Account holder who meets the criteria.
Since the Self Visa is intended to be a credit-builder card, there are no credit checks required.
Lauren Bringle is an Accredited Financial Counselor® and Content Marketing Manager with Self Financial – a financial technology company with a mission to help people build credit and savings. Connect with Lauren on Linkedin or Twitter.