If you have been using credit for quite some time, then more than likely, you will have received a couple of amazing credit card offers in your mail that you are preapproved for. Credit card issuers send out these offers to solicit new business from consumers who they think will qualify.
But, you may be wondering if they are even legitimate. Well, that is understandable. However, a preapproved credit card offer is nothing to be skeptical about. In fact, accepting a preapproved credit card offer may even be a good idea, especially if it includes terms not available with a regular credit card application, such as a competitive interest rate or better reward bonuses.
In this article, we will take a look at preapproved credit cards: what they are, how they work, whether they affect your credit, as well as the benefits of using them.
What Is A Preapproved Credit Card?
Simply put, when you are “pre-approved” for a credit card offer, this means that the credit card issuer has determined that you meet certain criteria after performing a soft pull of your credit report.
A credit card company may send you an offer by mail, email, or phone noting that you have been preapproved for a credit card. As mentioned above, this means that they have reviewed your credit history through what's called a soft inquiry or soft pull.
Unlike “hard” inquiries, which occur whenever you apply for credit, a “soft” inquiry will not affect your credit whatsoever. However, it does allow creditors and lenders to access your credit score and credit history to determine whether you might qualify for a card that they are offering.
Do understand, however, preapproved credit card offers are simply offers. Meaning, there is absolutely no guarantee that you will even qualify for the card. In short, you will still have to complete an application to obtain full approval, which results in a hard pull.
How A Preapproved Credit Card Affects Your Credit
Before a credit card company makes a preapproval offer, they will conduct a credit inquiry. Fortunately, not all credit inquiries negatively impact your credit score. In fact, an inquiry that occurs as a result of a preapproval screening will not affect your credit score.
However, as mentioned before, if you do decide to take the offer and apply for the preapproved credit card, your creditor will need to conduct a more detailed credit check or a hard inquiry. The resulting hard pull will cause your credit score to temporarily dip by a few points.
Credit inquiries fall under the category of “New Credit”, a factor considered in credit score calculations. And while New Credit is one of the lesser influencers, it can still negatively affect your credit score. Multiple inquiries in a short time frame will cause creditors and lenders to view you as a high-risk borrower.
Fortunately, applications for the same type of credit, within a certain time span, will only count as one hard inquiry on your credit report. VantageScore counts all inquiries within 14 days as a single inquiry if they are for the same type of loan, while FICO’s newer versions allow for a 45-day grace period for inquiries pertaining to mortgage, auto, and student loan applications.
Convenience. Rather than you searching out potential cards and comparing terms, credit card companies come to you. As a matter of fact, If you have a good credit score and history, you may attract even more offers for credit cards with amazing rewards, bonuses, and other benefits.
No Credit Damage. As stated before, If a company screens you for a preapproval offer, the resulting soft credit inquiry will not bring down your score. This means that you get to see card options at no risk to your credit score taking a hit.
Competitive Terms. If you are applying for a credit card, you may not be able to receive the most competitive terms, especially if you have less-than-desirable credit. However, because the creditors themselves are advertising the card to you, it is highly possible that you might qualify for better interest rates.
Bonus, Rewards, and Other Perks. If you have been looking into travel rewards cards or cards that offer introduction bonuses and other benefits, a preapproval offer is a good way to find out whether you can qualify for one of these cards. What’s more, since preapproval offers are used to reinvigorate consumer interest, most preapproved credit cards have even better bonuses.
The Bottom Line
Receiving preapproved credit card offers is a great low-effort way to compare credit card terms, since its the credit card companies themselves that are coming to you, and not the other way around. Fortunately, a preapproval credit card offer will not affect your credit, unless you accept the offer, of course.
Fortunately, you are under no obligation to accept any preapproved offer. In fact, for those who do not want to receive unsolicited offers, and prefer not to, you can always opt-out. But, do consider staying on the preapproval list, as you may find a credit offer that you may like.
However, it is important to note that if you do decide to accept a preapproval offer, your credit history will be scrutinized. Meaning, if your credit history and score do not meet the requirements of the creditor, you may not qualify for the offer, even if you are preapproved. Get your credit fixed. Call us at 888-799-7267 to schedule a Free Consultation.
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