If I’m Pre-Approved for a Credit Card, Will I Get a Hard Inquiry?
Unravel the mystery of credit card applications. Learn when your credit is truly checked and how different stages impact your financial standing.
Applying for a new credit card involves considering its potential impact on your credit score. Consumers often wonder how “pre-approval” affects their financial standing. Understanding the distinction between credit inquiry types is important for navigating these processes and making informed decisions.
Understanding Credit Inquiries
Credit inquiries are records on your credit report whenever a party accesses your credit information. These inquiries fall into two main categories: soft inquiries and hard inquiries. Understanding their difference is fundamental to knowing their impact on your credit profile.
A soft inquiry, also known as a soft pull or soft check, occurs when a person or company reviews your credit report without a specific application for new credit. Examples include checking your own credit score or when a lender pre-screens you for promotional offers. Soft inquiries do not affect your credit score.
In contrast, a hard inquiry, also known as a hard pull or hard check, typically occurs when you formally apply for new credit, such as a credit card or a loan. This inquiry indicates a lender is performing a comprehensive review of your creditworthiness to make a lending decision. Hard inquiries can temporarily lower your credit score.
The Pre-Approval Process
Credit card pre-approval is a process where a lender assesses your credit profile to determine if you are likely to be approved for a credit card product. This initial assessment uses a soft inquiry. Lenders use basic information, often obtained from credit bureaus, to extend these offers.
The pre-approval process does not negatively impact your credit score because it involves a soft inquiry. This allows consumers to gauge their eligibility for various credit card offers without risk to their credit standing. Pre-approval serves as an invitation to apply, indicating you meet certain preliminary criteria, but it does not guarantee final approval.
From a lender’s perspective, pre-approval is a marketing tool to target eligible customers. For consumers, it offers a way to explore credit card options and understand the likelihood of approval before committing to a formal application. This preliminary step helps in making a strategic choice among available credit products.
The Full Application Process
When a consumer proceeds from a pre-approved offer to submit a formal credit card application, the process shifts regarding credit inquiries. At this stage, the lender requires your explicit consent to conduct a thorough review of your credit history. This comprehensive review necessitates a hard inquiry.
A hard inquiry is performed because the lender needs to verify your financial background to make a final lending decision. This involves accessing a full credit report from major credit bureaus. The full application typically requires detailed personal and financial information, including your full legal name, Social Security Number, physical address, gross annual income, and employment status.
The hard inquiry is a standard part of the underwriting process to assess your ability to manage new credit responsibly. While pre-approval suggests a high likelihood of acceptance, final approval is contingent upon this detailed credit examination. The hard inquiry is an unavoidable step when formally applying for a credit card.
Hard Inquiry Impact on Credit
A hard inquiry can result in a slight, temporary dip in your credit score. While the exact number of points varies, a single hard inquiry typically reduces a FICO Score by fewer than five points. The impact is generally minimal, but it can be more noticeable if you have a limited credit history or few existing accounts.
Hard inquiries remain on your credit report for up to two years. Their influence on your credit score usually diminishes significantly after the first few months, and most scoring models only consider them for about 12 months. Applying for multiple credit cards within a short period can lead to a compounding negative effect on your score, as it may signal increased risk to lenders.