What Does It Mean If You Are Prequalified for a Credit Card?
Decipher credit card prequalification: understand what it means, its benefits, and what to expect when applying for offers.
When you encounter the term “prequalified” for a credit card, it signifies an initial step in the application process. It is an early indication that you might meet a card issuer’s criteria, providing insight into potential offers without immediately affecting your credit score. It is important to understand that prequalification is not a guaranteed approval for a credit card.
Understanding Prequalification
Prequalification means a credit card issuer has conducted a preliminary review of your credit profile and determined you likely meet their basic requirements for specific cards. This process serves as an invitation to apply, offering a level of confidence before a formal application. However, being prequalified does not guarantee final approval for the credit card.
While often used interchangeably, “prequalification” and “pre-approval” can have subtle differences depending on the issuer. Prequalification is typically initiated by the consumer, whereas pre-approval offers might be sent directly by an issuer. Both indicate a stronger likelihood of approval compared to a cold application. The primary benefit of prequalification is the ability to view potential credit card offers without impacting your credit score.
The Prequalification Process
Credit card issuers conduct prequalification by performing a “soft inquiry” on your credit report. A soft inquiry, also known as a soft pull or soft credit check, is a review of your credit information that does not affect your credit score.
During a soft inquiry, issuers typically access information such as your credit score range, existing debt, and payment history. They may also consider income information you provide during the prequalification process. Consumers usually encounter prequalification offers through online tools on issuer websites where they input basic personal and financial details.
Applying After Prequalification
After receiving a prequalification, the next step to obtain the credit card is to submit a formal application. This formal submission triggers a “hard inquiry” on your credit report. A hard inquiry, also called a hard pull or hard credit check, is a more thorough review of your credit report by a lender. This type of inquiry can cause a temporary, minor dip in your credit score, typically by a few points, and remains on your credit report for up to two years.
Despite being prequalified, an application can still be denied for several reasons. Your credit profile might have changed between the prequalification and the full application, such as an increase in debt or a new negative mark. Errors on the application itself, or new information discovered during the hard inquiry, like recent delinquencies, can also lead to denial. Insufficient income or a high debt-to-income ratio are additional factors that could result in a denial. Before proceeding with a full application, it is advisable to review the complete terms and conditions of the offer.