Prequalification for a credit card is an initial credit review conducted by a financial institution to determine if you might be a good fit for a credit card. You may request a prequalification offer, or you might receive one in the mail or by email. While it’s not a guarantee that you will be approved for a card, it can be a step in the process towards approval and may provide information about different cards that could be available to you.
If you are considering shopping for a new card, learn more here about what credit card prequalification is and isn’t.
Key Points
• Credit card prequalification involves a preliminary credit review and suggests likely approval, but it is not guaranteed.
• Prequalification usually assesses card suitability and options without a hard credit inquiry; this can help maintain your credit score.
• Prequalification and preapproval are often the same, though preapproval might suggest a higher approval likelihood for some forms of credit.
• You may receive or request prequalification offers; vet those that arrive by mail or email carefully.
• Maintaining a high credit score and updating income details may enhance prequalification odds.
What Is a Prequalified Credit Card Offer?
As noted above, credit card prequalification is when you are alerted that you may qualify for a particular credit card. Or you might request to be prequalified before formally applying for a card.
The prequalification process typically involves a card issuer conducting a basic review of a person’s creditworthiness to see if they’re likely to be approved for a new account. When you are prequalified, it means you seem to meet some of the key requirements for a card and have a good shot at approval. You still must, however, go through the steps of formal approval if you are interested in obtaining the card.
How Do Prequalified Credit Card Offers Work?
Credit card issuers will often invite people to fill out a form to see if they are likely to qualify for a new credit card. This process authorizes the card issuer to perform a soft credit check, which is often referred to as a “soft pull.” A soft vs. hard pull is basically a glimpse of someone’s credit profile, but it doesn’t affect their credit the way a deeper inquiry can.
Other times, card issuers will prequalify a potential customer based on general data that they’ve purchased. Or the card issuer may reach out because you have requested information from them in the past or are already a customer for one of their products.
But remember: Even if you receive a prequalified credit card offer, it doesn’t mean that you will be approved for a new account. It just means that based on the information reviewed, your application is likely to be approved.
Preapproved vs Prequalified Credit Card Offers
There’s often no difference between preapproved for a credit card vs. prequalified, and those terms may be used interchangeably. In some cases, however, being preapproved for a credit card can suggest that more extensive review was conducted, meaning that the odds of approval may be higher than if you were prequalified.
For example, a card issuer may conduct more detailed credit reviews before sending preapproved offers to potential consumers, while consumers who request a prequalification offer may be subject to a slightly less rigorous credit check. As you see, there’s some variation in how the terms are used, so don’t be surprised if they may vary from one issuer to the next.
Generally, however, being preapproved or prequalified may indicate that you are very much on track to get that new rectangle of plastic with your name on it, once a final review is completed. The issuer may have already done, say, a brief review of your qualifications.
A little extra intel: With other types of loans, such as mortgages, prequalification is usually a first step to securing funding, while preapproval takes you further along the road to getting a home loan. It can be as far as you can go in the process without having a contract to buy a property in place.
Recommended: What Is the Average Credit Score in America?
Benefits of a Prequalified Credit Card Offer
Understandably, most people don’t want to apply for a credit card unless they are likely to be approved. The reason? Every time you apply for any type of credit card, the issuer will do a hard pull to review your credit, which can lower your credit score by several points for a year.
By filling out a brief form to request a credit card prequalification, potential applicants can find out if the card they are considering aligns with their credit profile. And while there’s no guarantee that being prequalified will result in approval, it could improve your credit card approval odds.
When You May Need Credit Card Prequalification
Those with solid credit may not see any reason to be prequalified before choosing a new credit card and applying for it.
However, regardless of where you fall in the credit score ranges, it can be a good idea to get prequalified. That way, you won’t waste time applying if you don’t meet the requirements. You could also avoid needlessly adding another credit inquiry to your credit report. Having multiple new inquiries in a short period of time can have a negative impact on your credit score.
Tips for Getting a Prequalified Credit Card Offer
If you’re interested in getting a prequalified credit card offer, here are some tips:
• Credit card prequalification offers are frequently sent by email or snail mail, so take a closer look at what arrives in your virtual and real-life mailbox.
• If you haven’t received a prequalification offer, you can often find one on the card issuer’s website. Going to the card issuer’s website is also a way to protect yourself from scams.
• Speaking of scams: Keep in mind that a prequalification offer can be fraudulent, and it’s wise to be especially cautious of links you receive by text or through social media. Going directly to the card issuer’s website is the best way to ensure that you aren’t risking identity theft.
• When looking for a prequalification offer, it can be smart to be selective. Smaller card issuers may send prequalified offers to those with bad credit, but the cards may have very high interest rates and fees. Always read the fine print before moving forward.
• Remember that even if you don’t think that you have the minimum credit score for a credit card with favorable terms, you might consider a secured card. While secured cards require a refundable deposit, you may find options with competitive interest rates and no or low fees.
• If you are seeking out a prequalified credit card offer, it may be helpful to check your credit score without paying. Once you know your number, you can request a prequalification for a card in your range.
Recommended: How Does the Credit Rating Scale Work?
Tips for Improving Your Chances of Credit Card Prequalification
There are several things that you can do to improve your chances of getting a prequalification offer from credit card issuers.
• First, you’ll want to maintain a credit score that’s as high as possible, since the way credit cards work involves tapping a line of credit and repaying it in a timely manner. Card issuers want to know that you have managed credit well in the past. Two important ways to build or maintain your score are to pay your bills on-time and to carry as little debt as possible.
• You’ll also want to keep your income information updated with your creditors. You can include the income of your spouse or domestic partner, as long as you expect to access that income to repay debts. You should also include all other sources of income such as child support, alimony, government benefits, and investment income. By showing a higher income, you might receive a credit limit increase on any existing cards, which could in turn lower your credit utilization ratio (your balance vs. your limit) and build your score.
A note about credit utilization ratios: Financial experts typically recommend that your balance not exceed 30% of your limit. Ideally, it would be just 10% or less of your credit limit.
How Does a Prequalified Credit Card Impact Your Credit Score?
Being prequalified for a credit card shouldn’t impact your credit score in any way. While an actual application requires a so-called hard pull that can affect your credit, the soft pull generated by a prequalified credit card offer has no effect on your credit history or credit score.
The Takeaway
Getting a prequalified credit card offer can indicate that you are likely to be approved for a new account, but it’s not a guarantee that your application will ultimately get the green light. Whether you receive a prequalification offer or request one, it typically does not involve a hard credit pull, meaning it shouldn’t impact your credit history. By understanding how prequalified credit card offers work, you can make the best decision when you’re looking to open a new account.
Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.
FAQ
What does it mean if you are prequalified for a credit card?
A prequalified credit card offer means that the card issuer has done a preliminary review of your credit profile and determined that you are likely (but not guaranteed) to be approved for the card. The credit company may have conducted a soft pull on your credit, which doesn’t impact your credit score, but it will likely need to do a hard pull to approve you.
Is it better to be prequalified or preapproved?
When it comes to credit cards, there’s typically no difference between being preapproved and prequalified. For other types of loans, such as mortgages, a preapproval typically carries more weight than a prequalification and usually reflects that the lender has done a deeper dive into vetting you for funding.
Can you be denied a credit card after prequalification?
Yes, you can be denied a credit card after prequalification. Being prequalified is not a guarantee that your application will be approved but an indication that you are a good candidate. When you apply for a credit card, the card issuer will take a more thorough look at your credit, conduct a hard credit pull, and may decline your application if they determine you are not creditworthy for their card.
What can prevent you from being prequalified for a credit card?
You may not be prequalified for a credit card when you appear less creditworthy than the card requires. For example, your credit score could be lower than the range sought, or your credit utilization ratio might be higher than the card issuer wants to see.
How many hard inquiries are too many?
While there’s no fixed number of hard inquiries that’s considered too many, having multiple hard inquiries within a few months can negatively impact your credit score. Each hard pull can lower your credit score by several points, often for up to a year, so multiple inquiries could ding your score by a significant amount. Applying for numerous new accounts can be interpreted by the credit-scoring algorithms as a sign of potential financial problems.
Is 10 hard inquiries a lot?
Whether 10 hard inquiries is a lot depends on the time frame. If you have 10 hard inquiries within a few months, then it will probably be seen as a sign of potential financial distress since you are seeking multiple sources of credit in a fairly short time frame. However, if those inquiries are spread out over a couple of years, that may be less of a problem.
Also, the credit-scoring formulas will effectively combine multiple hard inquiries for a single instance of seeking an auto, home, or student loan within a short period of time (from 14 to 45 days for FICO® Scores). That would typically be considered rate-shopping behavior and not a sign of financial problems.
photo credit: iStock/Igor Suka
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