What’s The Difference Between Pre-Approved And Pre-Qualified?

If you’ve ever thought about getting a credit card, or you already have one, it’s always good to have an estimate of whether the lender will approve your application — especially if your credit isn’t where it should be. The reason is that credit issuers perform a hard pull on your report, which can temporarily affect your score.

One way to learn is by applying for a card that offers prequalified or preapproval screenings. Many people use these two terms interchangeably, but according to NerdWallet, there’s a difference. 

Pre-qualification is when the creditor assesses your financial information and provides an educated guess about your approval chances. Pre-qualification doesn’t mean guaranteed, but it’s a step in the right direction. 

Preapproval is when the lender offers that guarantee. If you are preapproved, it means the lender will approve your application. 

Additionally, many creditors may lump both terms together as a “prescreening” promotion. Whenever you apply for a credit card and are approved for a specific deal, review the disclosure they give you. It will provide you with a better idea of your prospects so you can plan your next move. 

Preapproval For Different Financial Products

Understanding preapproval when it comes to credit cards can get complicated. However, with personal loans and other types of installment loans, the process is much more straightforward. People looking for these loans frequently go through both processes as the lender moves closer to approval. 

For example, when you look for a new car, pre-qualification helps you understand your potential borrowing limit. On the other hand, preapproval lets you put a downpayment on the vehicle you pick.

But lenders don’t require that degree of approval when it comes to credit cards. As a result, applicants are typically prequalified, rather than preapproved. More often than not, a lender that offers guaranteed approval is a bad sign since they typically push credit cards on people who don’t want or need one. 

Your bank or other financial institution might already send you offers for preapproved credit cards. Sometimes they’re sent by card companies that promote “instant-approval cards,” which often come with steep interest rates and other fees.

If you receive one of these promotions, read it over carefully and critically before applying. It’s important to consider if opening a credit card from that company is the best decision for you.

If frequently receive these offers in the mail and you’ve ever wondered how to make them stop, visit optoutprescreen.com. The three major credit bureaus — Experian, TransUnion, and Equifax — operate this website. You can choose to blacklist these offers for either five years or permanently. 

Look For Issuers That Promote Prequalification

The most popular credit card providers — and even less-common ones — provide pre-qualification screenings on their website. Generally, all issuers request the same information, such as your full name, address, and Social Security number. Then it runs your details through a soft credit inquiry, which doesn’t do anything to your score.

Depending on the lender, they might tell you more information about their offers, like the credit limit, APR, or other features before you officially apply. Pre-qualification screens like these are more narrow and thorough. To some people, it means the same as preapproval. However, you still have to apply to get it. 

If the terms the lender offers are favorable, you can proceed with the application process. Once you officially apply, the lender runs a hard inquiry to get a better idea of your creditworthiness. If you qualify, then you will get a notice of approval.

Keep in mind that not every credit card provider extends pre-qualification checks on every card. NerdWallet noted that in September this year, Capital One promoted a pre-qualification check exclusively on the Capital One QuicksilverOne Cash Rewards Credit Card as well as the Capital One Platinum Credit Card (cards for those with average credit). It also ran a pre-qualification offer on the Capital One Secured Mastercard, which is best for improving your credit.

Pre-qualification lets you know where you stand. However, having no red flags on your credit report and a healthy score should give you a better understanding. Depending on the card, you may only get approved if you have very good or excellent credit.

 

Source
  • Palmer, Kimberly. “Credit Card Preapproval vs. Pre-Qualification.” NerdWallet, 27 Oct. 2020, www.nerdwallet.com/article/credit-cards/credit-card-preapproval-vs-pre-qualification.
Ian Schindler