Credit card offers by mail
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Just about everybody has received an application in the mail to apply for a new credit card. Sometimes the offers are preapproved and sometimes they’re prequalified. What’s the big difference?

These terms are used interchangeably, and both mean you’re very close to getting a line of credit. Let’s take a deeper look.

Am I preapproved or prequalified?

Prequalification is the first step in the application process. Credit card lenders send you special offers by mail and email saying you are prequalified for a credit card. They may also send you a notification about a prequalified offer when you use a mobile banking app.

In prequalified offers, the lender has already reviewed your credit score, but it has not yet requested a formal inquiry on your credit report, which requires your permission. At this stage, the lender is only looking for people within a specific score range or with other qualifications. You’ll still need to actually apply for a card.

Meanwhile, preapproval means the bank has already determined that you’re a likely candidate for their line of credit. They’ve taken steps to approve you, but you still need to let the bank run a hard inquiry into your credit report to turn the hypothetical approval into an actual approval.

So what’s the big difference?

The difference is where banks get the information that determines whether you’re preapproved or prequalified. If you get a notice saying you’re prequalified, it’s probably because the bank asked a credit bureau to compile a list of people who fit a certain demographic: age, location, credit history, and a range of credit scores they fall into. The bank is casting a wide net for people.

With preapproval, banks ask credit bureaus for a similar list, but the data they request is much more detailed. This is costlier for the bank, but it helps the bank narrow the list of people to which it would like to extend credit. From a customer’s point of view, preapproval is a much stronger signal that she could receive approval if she chose to apply.

Although applying for a prequalified or preapproved credit card could dock a few points from your credit score, simply being prequalified or preapproved will not impact your credit.

Not sure which card to apply for? Let Bankrate help you choose one that most fits your lifestyle.

The final word

If you receive an offer in the mail or through your email about a prequalification, don’t assume you’ll automatically qualify, and don’t worry that this offer will impact your credit score. In most situations, these offers can be a good place to start so you can obtain the approval you desire. You can also visit the lender’s website to apply directly.

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