What Is Credit Card Preapproval?

Definition and Examples of Credit Card Preapproval

Credit card issuers look for ways to promote their cards and encourage consumers to apply. Credit card preapproval is one way to do that. Card issuers prescreen consumers based on criteria like meeting a minimum credit score. To do that, they complete a "soft inquiry," which is a credit review that doesn't impact a credit score.

Card companies then send mailings to those consumers to let them know they've been preapproved and to invite them to apply for a card. Consumers aren't actually approved for the card until they apply, and the card issuer checks their credit report and score. That is a "hard inquiry," which means it's a credit check that impacts a credit score.

How Credit Card Preapproval Works

Credit card companies prescreen potential cardholders and send promotional and marketing offers, telling them they are preapproved or prequalified for a card.

After you receive the prescreened offer in the mail, you can apply for the credit card to determine whether you are approved. During the preapproval process, you'll need to provide information like your name, address, gross annual income, monthly rent/mortgage payment, Social Security number, and more. Once you submit the form, you'll find out whether you've been approved for the credit card.

If you're denied for a credit card, the card issuer will send you an adverse action notice. This notice explains why you were turned down for credit, your credit score (if used in the decision to deny you credit), and the name, address, and phone number for the credit bureau that supplied the information. You'll also be entitled to a free credit report if you're denied because of information in your credit report. You'll have 60 days to request this report.

You can use this opportunity to figure out what's hurting your chances of being approved and work to improve your credit score.

Disadvantages of Credit Card Preapprovals

You don't need to be preapproved to apply for a credit card. You can directly apply for one by visiting a credit card company's website. Many credit card companies also allow you to check on their website to se whether you are likely to qualify.

Proactively checking to see whether you qualify for a credit card can save you the trouble of applying for credit cards that you might not qualify for. That is important, since new credit applications are considered hard inquiries, which can lower your credit score and make it more difficult to get future applications approved.

Proactively getting preapproved for a credit card gives you the chance to see what terms you could potentially receive if you were to apply for a credit card. You get a snapshot of what could happen if you were to apply, and it gives you the chance to decide whether you want to move forward with that credit card.

Keep in mind that the credit card offers you receive in the mail might not be the best out there. Before you apply for a card after receiving that prescreened offer, go online to check the card issuer's most recent offers along with those from other issuers. You may find something better than the offer you received in the mail.

How to Stop Credit Card Preapprovals

If you no longer want to receive prescreened credit card offers in the mail, you can limit them. Opt out by visiting OptOutPrescreen.com. You can opt in again on the same website if you previously opted out.

Opting out will stop prescreened offers that used information from the three credit bureaus, but you may still receive offers from companies you already do business with or from companies who got your information from somewhere besides the credit bureaus.