When applying for a credit card for personal use, you may often receive a letter in the mail that highlights a pre approval offer, and you might be wondering: what does that even mean?
Getting a credit card is not as easy as submitting an application, getting it issued and receiving it at your doorstep the next day.
The application goes through a fleshed-out evaluation process where your credit card issuance request undergoes an extensive inspection before approval. Due to the steps involved in this, several different factors can impact this decision.
An example is that a person may have applied to get a credit card, and although all of their paperwork would check out, their credit score might not be good enough, affecting their likelihood of preapproval.
However, one way to overcome this would be to check for preapproval on credit card offers primarily because they have no impact on your credit score.
Let’s discuss this in a bit more detail, understanding what it means to get credit card preapproval, highlighting the different benefits of getting a preapproved credit card, and how you can get preapproved for your credit card.
What Does Credit Card Preapproval Mean?
Before diving deep into preapproval and understanding how it works, it is crucial to understand first what it means to get a credit card preapproved and how the system works.
Ever since the emergence of vast online payment gateways and the birth of the fintech industry, competition amongst banks to issue credit cards has increased tenfold, resulting in a much more competitive landscape.
Due to this surge in competition, many credit card issuers have started to adopt unique approaches to promote their credit cards and encourage a broader range of audience to invest in them. A very effective approach is credit card preapproval.
What many credit card companies have started doing is that they have integrated a pre-screening process with selective card applicants who meet certain criteria, such as a minimum credit score threshold. This test consists of a soft inquiry process involving a possible credit review that does not affect the credit score.
When the issuers have prepared the list of applicants selected for preapproval, they send over preapproval on credit card offers in the mail, inviting them over to apply for their card.
In the case that one of the recipients of the credit card preapproval offers to respond to the mail and apply for a card, a ‘hard inquiry’ is then processed.
This inquiry procedure involves checking the credit score and report. Because this is a hard inquiry, the outcome of this check has an outstanding possibility of impacting your credit score.
How the Preapproval Process Works
How it works is that the credit card issuing companies conduct a fleshed-out pre-screening procedure, which involves credit score evaluation to shortlist a select few potential candidates to receive preapproval on credit card offers.
After settling on the potential consumers for their credit cards, these issuers send over various promotions and marketing offers to the candidates who meet the eligibility criteria, informing them that they have been selected for preapproval.
In the case of the consumer who has received the mail after receiving the offer, the next step is to apply for a credit card so that they can apply to get approved.
As far as the information needed for applying is concerned, the credit card company would need personal information such as your name, address, social security number, and annual income.
In the case that the consumer gets declined after submitting their credit card application, the issuer will send them an adverse action notice, which would consist of the reasons that the consumer may have been turned down, as well as informing the consumer of their credit score and all of the contact information needed to contact the credit bureau.
Furthermore, receiving an adverse action notice would also entitle the consumer to a credit report free of cost if the denial was due to certain information mentioned in your credit report.
Benefits of Preapproved Credit Cards
- Less Work Involved
Usually, a consumer would have to search for credit card companies where they would want to gather information on their eligibility criteria. Furthermore, they would need to consider other factors, such as inquiring about the branch locations and the card type.
However, if you have been selected for credit card preapproval, the issuing companies and lenders would contact you instead, providing you with many viable options without you having to search for them.
Furthermore, if you have an excellent credit report with a high credit score, noteworthy card issuing companies would also reach out to you, offering various rewards and other benefits in hopes of having you apply for their card.
- No Damage to Your Credit Score
How the preapproval process works is that when the card issuing company checks your information to determine if you fail to meet the eligibility criteria, the concerned department performs what is known as a ‘soft inquiry.’
The great thing about this soft inquiry process is that this part of the screening process will not bring down the consumer’s credit score, allowing the potential consumer to view the possible card options without any risk of negative impact on their credit score.
- Rebuild Your Credit Profile
Although most noteworthy credit card issuing companies only approach consumers with a high enough credit score, certain organizations actively seek out people with poor credit.
This is because these issuers offer consumers the ability to assist them with rebuilding their credit profile by providing them with a limited credit line to improve their credit score.
However, one thing to consider before going for such a company is to monitor the interest rates they charge.
This is because there are a lot of issuers in the market who charge a considerably high-interest rate, which could have a negative impact on your finances when performing any purchases using your credit card.
- Debt Consolidation Opportunities
In addition to providing you with a limited credit line, many other companies in the market offer credit card preapproval that include various promotions, depending on how good your credit score is.
These promotions can include many introductory benefits, such as no annual percentage rate, also known as APR, for a limited time.
APR is defined as the yearly interest generated by a flat percentage rate. For a credit card, having no APR means that when using that card for purchases, they would not be subject to any form of interest for a certain period.
How To Get Credit Card Preapproval
As discussed earlier, there are many different benefits in the form of promotions and opportunities to build up your credit profile, which come with getting a preapproved credit card issued, which is why it would make sense that more and more people would want to reap some of the rewards as well.
Let us discuss how you can opt for this service and apply for preapproval.
- Visit the Issuer’s Preapproval Page
Before even considering what information is needed to apply for credit card preapproval, you first need to research what credit card companies offer this service.
Not every credit card company offers the option to get your card preapproved. A great way to identify those who do is to look for a separate webpage associated with the process.
This page would contain general information on the overall preapproval process and the form you would need to fill in with some basic personal information.
Furthermore, many companies also offer preapproval on credit card offers, so it is advised to take a look at that section as well.
- Fill Out the Credit Card Preapproval Form
After pinpointing precisely what company to go for, next comes filling out the form for preapproval. When doing so, it is essential to understand that each issuer has a different type of form.
However, they typically ask only for your basic information, such as your name, address, and the last four digits of your social security number, and it does not take much time.
This article was a simple and condensed guide to what information you should consider when determining whether to apply for a credit card that you have received preapproval offers or not. A preapproval can give you insight into what credit cards you may high a higher likelihood of being approved for, and can aid in your decision on whether or not you want your credit pulled to see if you are approved or not.