Banks and credit card companies often send messages or mail to consumers stating that they have pre-approved for a credit card. Almost all of us have received some form of these pre-approval offers at least once. Sometimes, the mail you receive says that you have been pre-approved, while at other times, the credit card company sends you a special code or an invitation to visit their website and fill out the pre-approval application. But is this pre-approval offer or “prequal” as it is popularly known just a marketing gimmick? Or is there some rational reasoning for sending out such offers? In order to answer that question, we first need to understand how the credit card approval process works.
What is the approval process?
A credit card application is approved only after a financial institution takes a detailed look at your entire credit history. They look at your past record, timely payment record, and many other details. These details are found in a credit report. So, in order to thoroughly evaluate your credit card application, a financial institution performs what is known as “a hard credit check” on your profile.
While there is nothing wrong in conducting a hard credit check, one of the downsides of that process is the drop in the credit score that you will see on your end. Every time there is a hard credit check performed, your credit score drops. If you apply for multiple credit cards in a short time period, you may notice a drop in your credit score even more clearly.
The reason for this drop in credit score stems from the fact that when a lender/financial institution checks your credit for a credit card or loan, you are signaling that you need money. You are giving the message that you do not have enough money at the moment to meet some expenses and that is why you need to borrow. Every time you borrow money, there is a risk that you may not be able to pay it back. Credit cards are similar to borrowing money, as you have a credit line that you use via the plastic card. That is basically the reason why one witnesses a drop in their credit score when a hard check is performed.
A solution to the hard check problem
The worst possible outcome for you as a consumer is the possibility that a financial institution or credit card company performs the hard check as part of your application process, and for some reason finds that they cannot approve you for a credit card. So now, not only are you left with a lower credit score, but you also do not have that new credit card which you were hoping to have. You are left with nothing. In order to address this issue, the prequal or pre-approval process came in.
In a pre-approval process for a credit card, a preliminary review of your credit is performed. This review is also known as a “soft” check on your credit. It is very different from the “hard check” as described above. In the pre-approval process, the financial institution only asks for basic personal information and some financial information along with it. The financial institution goes through that basic information and figures out whether you are likely to be turned down or whether you have a good chance of actually getting approved. Once it is established that you indeed are a good candidate for that new credit card, the company pre-approves you and you can go ahead with a detailed application along with the hard credit check. If you were refraining from applying for a credit card out of the fear of getting rejected, you now have a reason to be optimistic.
What factors play a role in pre-approval?
While there is no fixed formula on how every credit card company does its pre-approval, there are some common things that almost all the companies look at. At the end of the day, each person is different and each profile will be evaluated accordingly. But following are some things that get looked at most of the time:
- Your income
- Your age
- Your marital status
- Your citizenship details
- Your employment record
- Details about existing loans and debts
- Any basic details of your credit file (soft checks only)
What happens after I am pre-approved?
After you receive communication from the credit card company that you have been pre-approved, you will be asked to fill out a detailed application form. Directions for this application will either be provided to you over mail or electronically over email. Follow the directions and submit your application. The pre-approval process is known to be quite fast and can sometimes take as little as 30 minutes. Many credit card companies conduct this pre-approval process online as well. You need to simply visit their website and look for a section or page labeled as pre-qualification, prequal, or pre-approval. Once on that page, you will have to fill out a short form with some basic information. A word of advice – always check terms and conditions before you apply for any credit card.
What happens if I am rejected after getting pre-approved?
Do keep in mind that even after getting pre-approved and filling out the application, you can still get rejected for a credit card. A pre-approval is not a guarantee for a credit card approval. However, chances of a rejection happening are low. One possible reason for rejection could be the fact that your financial record may have changed since you got pre-approved. You might have missed a payment in the few days or weeks between pre-approval and evaluation for final approval. Or perhaps your employment situation may have changed.
If you do unfortunately get turned down, you may receive what is known as “adverse action notice”. Do not worry about the legal sounding phrase. It is just an official form of communication stating that your application was not approved. You do not have to take any action from your end if you receive an adverse action notice.
On the brighter side, you can always try to apply for a credit card again after 30 days post rejection. Or you can try applying with a different company. Every business evaluates credit data differently. If you need advice on how to best present your data and your file to a credit card company, we have a team of experts that can help you maximize your chances.
Will you sell my personal information to financial institutions if I apply for a pre-approval on your website
We are a reputed company operating in the space of personal finance. As a result, we implement best business practices and work ethically with all our clients and prospective customers. You can be assured that your data is safe and secure with us. We do not sell data for marketing purposes.
However, in order to evaluate the best credit card offer for you, we need to share your basic information with credit card companies for them to be able to perform a soft check on your profile. As outlined above, it is a critical part of the credit card approval process and one which eliminates the risk of credit score reduction arising from a hard check. So, information is shared only to gauge the interest of credit card companies in wanting to offer you a credit card. Beyond that evaluation, there is no other sharing or disclosure of personal data involved.
What are some companies that offer credit card pre-approval?
While there are many financial institutions and credit card companies that offer pre-approval of such cards, the following are some of the most popular names in the industry:
- American Express – AMEX cards have some useful benefits, especially in the areas of travel, insurance, and charges dispute. They offer pre-approval. Visit their website for more information. They may also send you pre-approval documents in the mail from time to time.
- Bank of America – One of the most well-known banks in the US, Bank of America has many physical outlets all over the country. They also have an extensive website. They do offer pre-qualification of credit cards, so it is worth looking up their website to apply for one.
- Capital One –One of the more popular credit card companies, Capital One sends out physical mail to plenty of potential customers who have been pre-approved as per their requirement. You can also look up their website and find the page for making an application.
- Chase – Chase is perhaps one of the most well-known banks in this entire list. They also run a pre-qualification program for their credit cards, where you may be sent mail or email by them announcing your pre-qualification. If you do get such communication, then follow the instructions to get started. You can also log on to their website and apply on your own rather than wait for their mail or email.
- Citibank – Citibank offers plenty of credit cards for all sorts of purposes. They go about the application process online and by physical letters. You may receive a prequal offer if you are an appropriate candidate. Alternatively, you can also look up their website and simply apply for pre-approval. They have a credit card section on their website which has a pre-approval page.
- Wells Fargo – Warren Buffet’s investment, Wells Fargo bank offers prequal on its credit cards. They have online and offline options to do the same. You can apply for pre-approval on their website if you do not want to wait for the mail to arrive. It is a well-known bank, so you won’t go wrong with Wells Fargo.
- Barclays – Barclays is a little bit different from the other institutions listed above. It offers pre-approval of credit cards by mail. They do not have an online facility to apply for pre-approval. So, you have to send correspondence via mail. But once the process is done, you can enjoy using their credit card if you get approved.
- Synchrony Bank – This bank is also another example of an institution that does pre-approval of credit cards via physical mail. They also do not have any provision for pre-approval of credit cards on their website. So, you will have to watch your mailbox for any offers or communication from Synchrony Bank in order to get that new credit card you have been hoping to get.
The above list is simply highlighting institutions that are well-known. There may be many other credit card companies who also offer pre-approval. If you search the web, then you will find many other options. If you do not wish to spend time looking up various companies, you can simply apply with us and we will do the work for you. We have a network of financial institutions where we can check to see if those institutions are willing to offer you a credit card. For that to happen, you will have to fill out some basic information on the basis of which we can select the best offers for you.
Another point to note, if for some reason you cannot get approved for a credit card, then you can always consider getting a personal loan. There are soft check personal loans that are available. So, you do not have to worry about a hard credit check and lowering of your credit scores. Besides, personal loans may have a significantly lower interest rate than credit cards. So, you can plug your finance needs via a personal or payday loan. Such loans may not necessarily require any collateral. The process will be similar to credit cards, which is to basically provide your personal, financial, and employment details.