Pre-approved credit card: What is it and how does it help?

Are you planning to apply for a credit card and are clueless as to how to go about it. Before you get a go-ahead from a bank for a credit card, remember that you may already have a pre-approval for the same. This is quite convenient in a way that you get to know well in advance about your chances of procuring a credit card before you even apply for it.

It is worth pointing out that pre-approval doesn't entail a hard inquiry and therefore, your credit score doesn't suffer in the process.

What is a pre-approved credit card?

Pre-approved credit card is an invitation from a bank for applying for a card online. It is, in fact, a process where a bank evaluates the creditworthiness of an applicant who is likely to qualify for one of their credit cards before they officially apply. Pre-approval is generally based on a soft credit check. 

This means it doesn't affect your credit score, and can give you an idea of your chances of being approved without a hard inquiry on your credit report.

How does it work?

Initial screening: Credit card issuers or banks usually use your basic financial information (such as income level and credit score range) sourced from credit bureaus to screen the candidates beforehand who meet certain criteria.

Offer: If you meet these criteria, you may get a pre-approval offer. Alternatively, some credit card companies permit you to check if you’re pre-approved for certain cards on their websites.

Soft credit check: During pre-approval, card issuers carry out a soft inquiry, which allows them to review parts of your credit history without letting your credit score suffer. Based on this soft check, they decide whether you meet the initial eligibility for the card.

Accepting the offer: If you receive a pre-approval offer, you can choose to accept and apply for the card. Once you formally apply, the bank will conduct a hard credit inquiry, which may impact your credit score, albeit temporarily. The card issuer or bank then reviews your complete credit history to make a final decision.

Final approval: While pre-approval increases your likelihood of approval, it’s not a guarantee. The issuer will examine your full credit profile before giving a final decision.

What are the benefits of pre-approval?

No impact on credit score: Pre-approval of credit card doesn’t affect your score until you apply, making it a low-risk way to explore options.

Saves time: If you get pre-approved, you have a better idea of what credit cards you might qualify for, saving you time from applying for cards that may reject you.

Higher chances of approval: Pre-approval generally means you meet the card’s basic criteria, improving your odds of a successful application.

The pre-approval offers often come directly from credit card issuers, but you can also find pre-approval tools on comparison websites or major banks’ online portals. You may also receive pre-approval offers through mail or email based on your credit profile if you have opted in to receive promotional offers.

To summarise, credit card pre-approval can be a helpful step in applying for a credit card without impacting your credit score upfront.