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When you’re considering applying for a credit card, it’s helpful to know beforehand whether you have a good chance of getting approved, especially if you aren’t sure your credit score is high enough. That’s because applying for a credit card typically means a “hard pull” on your credit, which can cause your score to take a temporary dip.
Consumers can get a better sense of their odds by getting “prequalified” or being “preapproved” by the credit card issuer. The terms are similar, and some issuers even use them interchangeably. But there’s an important distinction.
In general:
- Prequalification means that the issuer has taken a look at your financial details and given you its best guess as to whether you’d be approved if you applied. It’s not a guarantee, but it’s a good sign.
- Preapproval, on the other hand, is more official. If you’ve truly been preapproved for a credit card, you’re almost certain to get it if you apply.
To make things even more confusing, both can also be referred to as “prescreened” offers.
When you go through a prequalification or preapproval process with a card issuer and get a thumbs-up for a particular offer, read the disclosure you’re provided. It should make it clear where you stand — whether you’ve just jumped the first hurdle or are nearly at the finish line.
Preapproval has a different meaning with credit cards
With installment loans, such as mortgages and car loans, the difference between prequalification and preapproval is more clearly defined, and it’s not uncommon for consumers to go through both as they get closer to a decision. As you start looking for a house, for example, prequalification gives you an idea of how much you’ll be able to borrow. Getting preapproved allows you to make a firm offer to the seller when you find what you want.
Also see: Joining the military can affect your credit, learn how to protect it
With credit cards, on the other hand, you don’t typically need that kind of advance approval. So prequalification is much more common that true preapproval. In fact, receiving an unsolicited guarantee of approval from a credit card issuer can be a red flag. That’s because some issuers promise preapproval in the hopes of selling you on a card you don’t necessarily need or want.
Preapproved credit card offers may come from an institution where you’re already a customer, in an effort to get you to open another card. Or they may come from issuers that specialize in “instant-approval” cards, which tend to carry extremely high fees.
Review any preapproved credit card offer you receive skeptically before applying to make sure it’s the right choice for you.
If you’d prefer not to get prescreened offers in the mail, you can opt out by going to optoutprescreen.com, which is run by the consumer credit reporting bureaus. You can sign up to opt out of prescreened offers for five years or permanently.
Major issuers generally offer prequalification
Many major credit card issuers and some smaller ones offer prequalification on their websites. The issuer asks for personal information, including your name and address and some or all of your Social Security number. It uses that information to run a “soft” check of your credit, which is one that doesn’t affect your credit scores.
In some cases, you’ll be able to see not only the card you prequalify for, but also the exact terms of the offer — such as the credit limit and interest rate — before you apply. These kinds of prequalfications are more specific and detailed and may even amount to a preapproval, but you still have to formally apply for the card.
If you decide to apply for the card based on that information, the issuer will go ahead and run the hard credit check. It will likely ding your score, but you’ll have more assurance of approval.
Read: What is the FICO Resilience Index, and how will it affect your credit?
You can also make your own best guess about whether you’ll be approved for a card by considering your credit score. Some credit cards are available only to those with excellent credit, or good to excellent credit.
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Kimberly Palmer is a writer at NerdWallet. Email: kpalmer@nerdwallet.com. Twitter: @kimberlypalmer.
