Seeing “you’re preapproved” for a credit card in the mail can be exciting – especially if you have bad credit. But what does a preapproval mail offer actually mean? Let’s dive into credit card mail offers, the language they use, and how credit card issuers offer preapprovals.
What Does A Credit Card Mail Offer Mean?
Credit card mail offers fall into one of three categories:
- Invitation to Apply: An invitation to apply is the most basic mail offer from a bank. Banks and lenders issue these offers based on various broad demographics information, such as your location, housing status, or income. Invitations to apply are essentially advertisements from banks, and as such, the approval rate for these mail offers is significantly lower than others.
- Preselected: Lenders preselect consumers based on information in their credit reports. However, these preselected offers are much broader than preapproval offers, meaning the bank requires more information before approving a credit card application. Preselection mail offers rely on basic credit information, such as a person’s credit score.
- Preapproved: Receiving a preapproval mail offer from a bank or credit card issuer is the closest thing to guaranteed approval. A preapproval letter means the bank has conducted a basic review of a person’s credit report, and the information they have means the letter recipient makes a good match for one of their credit cards. Getting a preapproval implies the person has approximately a 90% chance of success when applying.
How Do Banks Get Your Credit Report Info?
If banks and lenders base most mail offers on information from credit reports, how do they receive that information? The simple answer is that they purchase it.
Many credit card issuers purchase basic credit information from the three major credit bureaus (Equifax, Experian, and TransUnion). The thought of banks buying your information might sound alarming – but it isn’t as invasive as it sounds.
The information banks purchase is the same basic credit information available to consumers through free credit monitoring tools, such as Credit Karma, Capital One Creditwise, or American Express MyCredit Guide. This info omits major credit report information that is only available when a person applies for a credit card, instead offering issuers a glimpse at the individual’s suitability for card products.
What to Do Before Responding to a Credit Card Mail Offering
There are two essential steps to take before responding to or accepting a mail offer for a credit card. These steps include:
Read the Terms and Conditions
Checking the fine print is essential to making sure a preselected or preapproval mail offers is a good deal. Beyond basic information like the credit limit, make sure the annual fee, penalty fees (including late payment charges), and other terms are suitable for you.
Check the APR
Checking the interest rate is also essential. A general rule of thumb is: The better the credit score, the lower the APR. It’s best not to let a card offer entice you to apply if you plan to carry a balance – but the interest rate charged on that balance is sky-high.
What to Do If You Decide Not to Apply
If the mail’s offer isn’t worth applying for, be sure to destroy the letter, as it may contain sensitive personal information. The simplest way to dispose of an offer for a credit card is to shred the physical mail offer. Tearing up or shredding the offer will make it more difficult for thieves to steal personal credit information.
If credit card offers become a nuisance, opting out of future mail offers is another option. The major credit bureaus (including Innovis, another credit agency) offer an opt-out service through OptOutPrescreen.com. Signing up on this website removes a person’s name from a list of prescreening consumers the agencies sell. Opting out is also available by calling 1-888-5-OPTOUT.
Related Article: How to Prepare Before Applying for a Credit Card