What Does Preapproved for a Credit Card Mean?

Credit card offers frequently use terms like “preapproved” or “prequalified.” Understanding what these terms mean is important for consumers navigating the credit landscape.

What Preapproval Means for Credit Cards

Preapproval for a credit card means a lender has conducted a preliminary assessment of your credit information, determining you meet initial criteria. It is an invitation to apply, not a guarantee of final approval, but suggests a high likelihood of approval if you meet all requirements upon formal application.

The process often involves a “soft inquiry” on your credit report. This type of inquiry allows lenders to review your creditworthiness without affecting your credit score. Soft inquiries are different from hard inquiries, which occur when you formally apply for new credit and can temporarily lower your score.

While “preapproval” and “prequalification” are often used interchangeably, both involve a soft inquiry and do not guarantee an account. Both terms signify an initial review suggests you are likely to be approved, helping you gauge eligibility without impacting your credit score.

How Credit Card Companies Extend Preapproval Offers

Credit card companies often extend preapproval offers through direct mail. They obtain consumer data from credit bureaus, such as Experian, Equifax, and TransUnion, based on criteria like credit score ranges or income estimates. This allows issuers to identify potential candidates aligning with their lending requirements.

These prescreened offers help credit card issuers target consumers likely to qualify, making marketing efforts more effective. Lenders provide credit bureaus with specifications, including geographic areas or desired credit score ranges. The bureaus then supply lists of individuals meeting these criteria, enabling targeted offers.

Consumers can also proactively check for preapproval offers using online tools on a lender’s website. Providing basic information, such as name, address, and income, triggers a soft inquiry to assess eligibility. This allows individuals to see potential offers fitting their credit profile without impacting their credit score.

The Application Process Following Preapproval

After receiving a preapproval offer, carefully review the terms and conditions, including the annual percentage rate (APR), fees, and potential rewards. Understanding these details helps determine if the offer aligns with your financial goals.

Accepting a preapproval offer leads to a formal credit card application. This application involves a “hard inquiry” on your credit report. A hard inquiry allows the lender to conduct a thorough review of your credit history and financial situation to make a final decision.

While preapproval indicates a strong likelihood of acceptance, final approval is not guaranteed. The hard inquiry might reveal new information or your financial situation could have changed since the initial soft inquiry. Hard inquiries can cause a temporary dip in your credit score and remain on your credit report for up to two years.