Last updated on July 17th, 2020
If you’re looking to be the owner of a new credit card, you’ll have to apply for it. Unfortunately, issuers don’t just hand them out (and if they did, we’d be very suspicious about that). A credit card application means the issuer will inspect your credit report and put a small ding on your credit score. On top of that, there’s no guarantee that you’ll be approved, and that inquiry will remain on your report for two years. If you can get prequalified for a credit card, however, you’re almost certain to be approved, and your credit score will not suffer for it – at least not initially. Prequalification basically means that you meet the issuer’s criteria to be approved for a given credit card, but it does not automatically approve you. The brunt of that criteria is your credit score, although other personal information is looked at. Once you’re informed of your prequalification, you can continue with the traditional application and – more often than not – be a new cardholder shortly thereafter. Below are useful tips for navigating credit card prequalification like a pro and avoiding common pitfalls.
How to Check for Prequalification
Go to the issuer. The best and quickest way to check if you’re prequalified is to go to the card issuer’s website and searching for prequalification offers. Most of the major card issuers have online forms that you can fill out with basic information, and these forms’ results will show you which cards fit your profile. Most of the time these forms only require your name, address, last four digits of your Social Security number, and (optionally) your income. You can also visit a physical branch is there is one and inquire about prequalification but, depending on the bank, you may have to be an existing customer. Speaking of which, you should consider the banks you currently do business with. They may have a credit card that’ll suit your needs and, since they already have your information on file, it’ll be easier to get a positive decision.
Check your mail. Another way to verify your prequalification is through a targeted offer in the mail. If you already receive offers for various credit cards, it doesn’t mean that issuers are blindingly mailing them hoping to land a bite. Credit card issuers buy consumer information from the credit reporting agencies and conduct screenings on their own to determine who would be a good fit for their products. Therefore, the next time you get an envelope with a credit card offer, it means that the issuer has already checked you out and you stand a good chance of being approved for that credit card if you apply.
Use a third-party online service. If you prefer the online method but don’t want to go issuer by issuer, there are websites with proprietary prequalification tools that can match you to cards from several issuers at a time. These resources are partnered with the issuing banks, so you’ll save some time by choosing this route.
Visit your favorite retail store. If you’re searching for a co-branded store credit card, you can see if you’re prequalified directly with the retailer. Whether online or at a physical store, you can provide the same information and get a response in less than a few minutes.
How Prequalification Affects Your Credit
When a card issuer runs a prequalification check on you, it performs a soft inquiry into your credit history. This means that the issuer only has access to some basic information about you, the most important being your credit score. Soft inquiries do not affect your credit score and they do not remain on your credit report for others to see – they are only visible to you. However, if you decide to apply for a credit card that you were prequalified for, the issuer will conduct a full credit report inspection – or a hard inquiry – as part of the process. This is the reason why prequalification doesn’t automatically mean approval. By prequalifying you, the issuer is telling you that you meet the preliminary conditions, but if your full credit history reveals some unsightly information, the issuer may decide to deny your application outright. Moreover, a hard inquiry will impact your credit score and remain on your credit report for all to see for 24 months. Remember that even though your credit score will be a few points lighter after a hard inquiry, it can eventually be beneficial as you’ll have more available credit. Provided that you’re responsible with your borrowing habits and keep your credit utilization ratio low, a hard pull will eventually become a smaller red flag.
Prequalification vs Preapproval
In addition to being prequalified for a credit card, you may be preapproved. The difference between these two terms is small but significant: It all depends on who makes the first move. With prequalification, you approach the issuer and inquire about your eligibility for one or more credit cards. When an issuer preapproves you, they reach out to you and give you a firm offer for credit. As such, preapproval portends an even higher chance that you’ll be approved for a card. Essentially, the issuer is telling you, “All you have to do is sign on the dotted line.” Preapproval is common from issuers that you already have a relationship with, as they have access to a more detailed profile of you. Also, keep in mind that, like a prequalification, a preapproval offer is followed by a hard inquiry into your credit report if you decide to go through with the application.
Mistakes to Avoid with Prequalification
Checking for prequalification is easy, quick, and relatively painless. Therefore, it makes you vulnerable to doing it often and, if you’re not careful, you could end up with more credit card applications than you need. You shouldn’t apply for more than a few credit cards at a time, otherwise, issuers will see you as a liability that could fail to repay borrowed money. Following the above caveat, you could dig yourself into a hole and apply for a credit card that you’ve been prequalified for but that you’re not equipped to manage long-term. For example, if you’re prequalified for a travel rewards card with a high welcome offer but also a high annual fee and a high APR, you could easily accumulate a lot of debt with no firm budget to pay it off. That’s why it’s always a wise move to ensure you’re prepared before applying for a credit card, even if you’re just checking whether or not you’re prequalified.
Remember that prequalification and preapproval don’t guarantee that you’ll have a new credit card in your wallet. It does mean you have a very good chance to be approved, but don’t be too surprised if you don’t get the result you’re expecting. In addition, you will still have to submit a full application, which will slightly lower your credit score due to the issuer conducting a hard inquiry of your credit report. Check your financial standing before looking up prequalification offers to ensure that there’s nothing potentially holding you back or that will result in a denial. To further keep you focused, research the cards that you’re interested in so you’ll have a shortlist of candidates presently in mind; you shouldn’t get too trigger happy and check for prequalification on every card you encounter. With preparation in place, you’ll have a smoother experience overall.