Part of Applying for a Credit Card Series
Preapproved and prequalified credit cards: What’s the difference?
The difference between credit card preapproval and credit card prequalification can be tough to pin down, even for credit experts. Not only do card issuers use the terms differently, some even use the two interchangeably.
Indeed, there’s no consensus in the credit card industry on what these terms mean—so when you’re searching for a credit card online or get a prescreened credit card offer in the mail, it can be difficult to know what sort of approval odds you’re facing should you apply.
The good news is that in either case, the card’s issuer has done some initial screening of your credit profile and decided you may be a good fit. The only question left is: Just how good of a fit are you? That’s where the extent of the issuer’s screening will be key.
As a rule of thumb, prequalification tends to refer to a less intensive screening that looks at your basic credit history and other personal information, whereas preapproval is usually more rigorous and often results from formal prescreening, which all but guarantees approval.
What is prequalification?
Typically, prequalification happens when you give a credit card issuer your credit information to check if you’re likely to qualify for a card. To see if you’re prequalified, issuers usually ask for basic personal and financial information like your income, monthly housing payment and Social Security number, then check your credit via a “soft pull” and let you know whether your credit profile meets their basic qualification criteria.
Prequalification allows you to get a sense of where you stand without putting your credit score at risk. If you prequalify for a credit card, you have a good chance of being approved should you formally apply—but there’s no guarantee.
The issuer is simply letting you know that based on an initial look, you meet their approval requirements. You’ll have to submit a formal application and allow the issuer to take a closer look at your credit history via a hard inquiry to know for sure.
You could also get a notice in the mail letting you know you’re prequalified for a card. This likely means the issuer asked a credit bureau to compile a list of people who fall into a certain demographic based on factors like age, location, credit history and credit score range. The issuer then sends out invitations to apply to consumers who meet these criteria.
But unless the mailer is explicitly labeled a “prescreened” offer of credit, this could be little more than marketing material. While the issuer has taken enough of a look at your credit profile to invite you to apply, they’re not extending you a firm offer of credit, so your application may be declined after the issuer dives deeper into your credit history.
What is preapproval?
Preapproval, on the other hand, typically refers to pre-screening that’s done on the issuer’s side. As with prequalified offers, preapproval often sees issuers partnering with credit bureaus to pull together a list of consumers likely to qualify for a given card—but the data they request is much more detailed. This is costlier for the issuer, but it helps them narrow the list of people to which it would like to extend credit.
From a customer’s point of view, preapproval based on this sort of prescreening is a much stronger signal that your application will be approved if you choose to apply. That’s because the Fair Credit Reporting Act requires that card offers that result from prescreening constitute a firm offer of credit.
This means that unless your credit profile changes dramatically from the time the lender reviews it and the time you apply, the lender is required to extend the firm offer of credit outlined in the offer.
Tread carefully, though: Some issuers use “preapproval” language interchangeably with prequalification language—especially online. You may even see such language on run-of-the-mill card advertisements.
Check the fine print of any preapproved offers you receive for a formal prescreen and opt-out notice to be sure it’s a true prescreened offer.
Pros of preapproved and prequalified offers
- Preapproved and prequalified offers don’t affect your credit score. Plus, you gain a better understanding of your chances at being approved for a credit card without a hard inquiry being applied.
- Credit card companies may extend unadvertised offers with better welcome bonuses or terms than those publicly available.
Cons of preapproved and prequalified offers
- Unsolicited offers can lead to more credit cards than you can handle. Don’t feel obligated to apply for a credit card simply because you received a preapproved or prequalifed offer in the mail.
- Preapproved and prequalified offers don’t mean you’re automatically approved for a credit card. For example, if you prequalify for a card, you gain a better understanding of where you stand, but there is no guarantee. A hard inquiry will apply to your credit history if you decide to formally apply.
Impact of preapproval or prequalification on credit score
Simply being prequalified or preapproved for a credit card will not impact your credit score. In either case, issuers check your credit via a soft inquiry. Only after you move forward with a prequalified or preapproved card offer and submit a formal application will you face a hard inquiry (unless you’ve opted for a so-called “soft pull” credit card).
Hard inquiries stay on your credit report for two years and knock a few points off your credit score. Though hard inquiries generally won’t impact your credit score for more than a year, you should still be selective with your card applications to avoid hurting your credit in the short term. That’s where prequalification and preapproval can be a big help.
Is preapproval or prequalification better?
On the surface, neither offer reigns superior. In either case, a hard credit inquiry still applies to your credit history when you formally apply. If your financial status suffers a dramatic change, a preapproval offer can be dropped, cementing the point that nothing is guaranteed. While both offer an insight into what type of credit card you may be eligible for, take these tools with a grain of salt.
Issuers that offer preapproval or prequalification
Most major credit card issuers offer preapproval or prequalification on some or all of their credit cards. Preapproval and prequalification are typically available either in the form of prescreened credit card offers sent in the mail or via preapproval tools on issuer or third-party websites, like Bankrate’s CardMatch.
Here’s a quick look at which issuers use prequalification or preapproval and how you can expect to encounter these offers:
|Issuer||Prequalification or preapproval available?||How to prequalify or get preapproved|
|American Express||Yes||Via CardMatch, American Express website or prescreened offer|
|Bank of America||Yes, on select cards||Bank of America website or via prescreened offer|
|Barclays||Limited||Only U.K. applicants can prequalify online; U.S. consumers may receive a prescreened offer, however|
|Capital One||Yes, on select cards||Capital One website, in-branch or via prescreened offer|
|Chase||Yes, on select cards||Via CardMatch, Chase website, in-branch or prescreened offer|
|Citi||Limited||Via CardMatch, in-branch or via prescreened offer; not currently available via Citi website|
|Comenity Bank||Limited||Via prescreened offer; occasionally available on individual store sites|
|Credit One Bank||Yes||Via CardMatch, Credit One website or prescreened offer|
|Discover||Yes||Discover website or via prescreened offer|
|Synchrony Bank||Limited||Via prescreened offer only|
|USAA||Limited||Via prescreened offer only|
|U.S. Bank||Limited||Via prescreened offer only|
|Wells Fargo||Limited||Via prescreened offer only|
The bottom line
While parsing the differences between preapproved and prequalified card offers can be tricky, getting either is a good sign, as both indicate that you’re likely a good fit for a given card. Knowing you’re prequalified or preapproved for a card should give you more confidence about your odds of approval, and help you pick and choose which card applications are worth the credit score ding.
That said, if you receive an offer in the mail or through your email about a prequalification, don’t assume you’ll automatically qualify, especially if your credit has taken a turn in recent months. While these offers can be a good place to start, they’re not necessarily a guarantee of approval.