What is a “Pre-Approved” Credit Card Offer?

With the economy show signs of recovery, many credit issuers are back to sending “pre-approved” offers to mailboxes, hoping to lure consumers into signing up.

But does it really mean when you receive a “pre-approved” credit offer?  Are you really guaranteed a credit card?

How Did You Get Pre-Approved for a Credit Card, Anyway?

What is a pre-approved credit card offer?

The first question that many consumers ask is this: How did I get pre-approved, anyway?

Basically, the credit card issuer buys a list from a credit bureau.  Credit reporting agencies collect information on your credit habits.  Not only do they compile credit histories that can be checked when you apply for credit, but they also sell lists of consumers to interested parties. (Kinda creepy, isn’t it?)

Some of the lists group consumers according to a rough estimate of the credit score range they are likely to fall into.

A credit issuer knows that you (like thousands of others on the list) are likely to qualify for a certain credit card offer.  You are sent the “pre-approved” letter, but in reality, you haven’t been pre-approved for anything.  You’ve just been pre-screened to receive the offer.

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The good news is that the credit card issuer hasn’t actually pulled your credit history.  There isn’t a hard inquiry on your report, so it won’t affect your credit score.  You won’t actually be subject to a hard credit pull unless you actually decide to apply for the credit card.

“Pre-Approval” isn’t a Guarantee of Acceptance

Just because you’ve been “pre-approved” doesn’t mean that you are going to qualify for the credit card.

Once the specifics of your credit situation are known to the credit card issuer, you might actually be rejected.  In some cases, you might not qualify for the advertised terms, but you might qualify for lesser terms.  That could mean you get a similar version of the card with downgraded benefits, higher rates, or lower credit limits.

For example, you might receive “pre-approval” for a card with a $3,000 limit and 0% APR on balance transfers for 15 months.

However, after you apply for the card, and your credit is more thoroughly checked, the issuer might decide to issue you a card with a $2,000 limit and an intro APR on balance transfers that lasts only nine months.  And if your credit isn’t at all what was thought originally, your application might be rejected, and you might not get the card at all.

There is no guaranteeing that you will be accepted, just because a credit card company claims that you are in its target demographic.

What Can You Do If You Don’t Want These Offers?

Perhaps you don’t want these offers?  If you don’t like them, it makes sense to shred them, so that you can protect your personal information as much as possible.  I’m a bit paranoid so I always make sure to destroy the application (I don’t want someone opening up credit in my name).

Even better, though, is to avoid having them sent to you in the first place.  You can go to  OptOutPrescreen.com and let the credit bureaus know that you don’t want to have your information sold to credit card issuers.  This can be an elegant solution to the problem.

Pre-Approved Offers can Work Out Great For You

On the other hand, if you are in a good financial and credit situation, you might want to receive these offers.

If you are looking to get a good deal, or a cash bonus, comparing offers can be a way to get the best credit card possible.

You can even use an offer you receive in the mail as leverage with a card you already have.  If your offer has some aspect you want then call up your current card issuer and let them know you’re considering switching to the new card.  If they value you and you’ve been a good customer they should try to work with you to keep you.

Back when I was getting myself out of credit card debt I started to get pre-approved offers as my credit score started going up.

I was making sure I paid my bills on time and I was paying more than the minimums to finally knock down my debt.  So as my score was going up I got more offers in the mail.  This could have been a slippery slope if I didn’t practice discipline but I was determined to get out of credit card debt.  I was able to pick one of the great offers that had a 0% balance transfer and move my credit card balance to the new card.  This allowed me a period where I wasn’t getting charged interest in my balance which made my monthly payments that much more effective (my payments were going totally to the principle rather than to interest).  The pre-approved offer helped my payoff my credit card debt faster.

Bottom Line On Pre-Approved Credit Card Offers

Pre-approved credit card offers can be a great way to find out about new cards and the benefits they have, especially if you’re in the market to open up a new one.  But don’t let the ‘pre-approved’ stamp fool you into thinking you’re a sure-in for getting the card. There’s a chance you don’t get approved.  And if you don’t really need a new card then it’s a waste of paper.

Have you ever opened up a new credit card based on a pre-approved offer?

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Published or updated September 6, 2014.

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