Have you ever received a message from a credit card issuer congratulating you on being pre-approved for a credit card? If so, don’t pat yourself on the back just yet. Being pre-approved might not means what you think it does.
How Did I Get Pre-Approved?
Although credit card issuers aren’t allowed to look at your credit history without your permission, they are allowed to purchase information in bulk from the major credit reporting agencies or other public and private sources. So if a card issuer wants to send marketing materials to potential borrowers who meet certain criteria, they can obtain a list of consumers that fall within a particular range of credit scores, incomes and even geographic locations. They can then send out a mailer to these consumers indicating that they are “pre-approved” for a particular credit card offer. Receiving this pre-approval means you met the general qualifications for that credit card offer at the the time the mailing list was purchased from the credit bureau.
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Does Pre-Approval Mean I’m Guaranteed the Credit Card?
Merely receiving a pre-approval notice does not in any way obligate the card issuer to approve your application. For example, your application could be rejected if your credit history has changed and your credit score has fallen since the list was compiled. In addition, your application could reveal information about your creditworthiness that is inconsistent with your credit history. For example, you might report a lower income on your application than was reported on the pre-approved list. Finally, the credit card issuer might pull your credit report from a different credit bureau than the one that was used to generate the pre-approval notice you received.
What Should I Do If I Get Pre-Approved?
Pre-approval notices are generally a marketing strategy used to encourage consumers to apply for a new line of credit, but it certainly does not mean that the offer you received is the most competitive one available. Despite being pre-approved, you should always take the time to thoroughly examine the card’s terms and conditions and compare that offer against others. And, even if you ultimately choose to apply for that credit card, you should see if there are other offers available for the same card, but with better terms. It’s not uncommon for there to be multiple offers available for the exact same card, but with different promotional financing terms, sign-up bonuses or other incentives such as a card’s first annual fee being waived.
It’s also a good idea to check your credit before applying for a credit card. Credit card applications generally cause hard inquiries to appear on your credit report, which can ding your score, so you’ll want to be sure your current one can handle the hit and qualify you for the offer. (You can check your credit scores for free each month on Credit.com.)
What If I Don’t Want the Offer?
If you don’t intend to apply for the offer, you should shred or otherwise securely destroy the mailing so that it can’t be used to fraudulently apply for a credit card in your name. If you do not want to receive any more of these offers, you can go to OptOutPrescreen.com to have your name removed from these lists. (This is the official website used by all of the major credit bureaus to handle requests to opt in or opt out of offers for both credit and insurance services.)
By understanding what pre-approval means, and what it doesn’t, you can make the right decision the next time you receive one of these offers in the mail.
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Note: It's important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.
Jason Steele has been writing about credit cards and personal finance since 2008, poring through the terms and conditions of credit card agreements to understand the minutiae of how these products work. His work has appeared on Yahoo, MSN, HuffingtonPost and other major news outlets. In his free time, Jason's a commercial pilot. He graduated from the University of Delaware with a degree in History. More by Jason Steele