Do Pre-Approved Credit Card Offers Affect Your Credit?

Introduction

At some point, you may have received an offer in the mail telling you that you’ve been pre-approved for a credit card.

If you’ve wondered exactly how a creditor came to that conclusion — and what it could mean for your credit — you may want to learn more about pre-approvals.

Can Pre-Approved Credit Card Offers Affect Your Credit?

If you’ve opened up an envelope and been greeted by a big, bold message excitedly telling you that you’re pre-approved, you’ll be happy to know that no, it doesn’t affect your credit score.

Pre-approved offers are based on the creditor having done a “soft inquiry” on your credit report, which is basically just an innocent peek behind the curtains. Soft pulls do not impact your credit score.

Both soft inquiries and hard inquiries are checks on your credit background. Both show up on your credit report. But only you can see the soft inquiries, whereas businesses checking your reports see just the hard inquiries.

How Do Pre-Approved Credit Card Offers Work?

Pre-approved credit card offers are extended after a creditor checks to see if you might be a good match for their product offering.

If you accept the pre-approved offer and decide to apply, they will then do a “hard inquiry,” also called a hard pull. This process is to make sure you still qualify for the card and to determine what your terms, like your credit line amount, should be.

A hard inquiry is different from a soft inquiry in that it generally gives the creditor more information.

Also, when they pull the trigger on that hard inquiry, your credit score will likely take a small hit. Hard inquiries are a recorded timeline of when you’ve applied for credit, and become part of your report for all creditors and lenders to see.

So while a pre-approved card offer does not affect your credit score, applying for the offer does. A hard inquiry can impact your score by approximately 5 to 10 points. However, this is a temporary ding, and your score typically bounces back after a few months if you continue to make your payments on time.

Benefits of Pre-Approved Credit Cards

Besides making you feel good about being chosen, pre-approved credit cards come with numerous benefits.

• No credit score impact: We’ve already talked about this, but it’s worth mentioning again. Pre-approval has no effect on your credit score (unless you decide to go ahead and apply for the card).

• Streamlined process: Instead of having to take the time and effort to research and track down cards you think might be suitable for your needs, the offers are coming directly to you.

• Competitive terms: Because the card company is approaching you with an invitation, there’s a chance you might get special rates not available to the general public.

• Promotional rates: Some pre-approved credit cards come with promotions, like an introductory 0% APR for a limited time or reduced rates for balance transfers. If you already have higher-rate credit cards, you can take advantage of these opportunities to pay them off.

• Bonuses and other perks: You could receive bonus rewards, gifts, or other attractive incentives just for accepting the invitation and getting approved. This could be higher points or cash back rewards for a limited time, bonus statement credits for meeting purchase amounts, or free gifts on approval.

Steps To Take Before Getting Pre-Approved

Creditors use soft inquiries to get to know a potential customer before sending an pre-approved offer. If you want to put your best self forward for one of these, there are a few steps you can take.

Step 1: Check your credit reports for errors and dispute them

Credit report errors — like accounts that aren’t actually yours and inaccurate late or missed payments — can hurt your credit and your odds of pre-approval. It’s also a good practice to check your reports for errors every now and then.

You can access your credit reports from all three major credit bureaus every week at AnnualCreditReport.com, which is authorized by the federal government.

If you don’t find any errors, that’s great! You may want to continue checking your reports on occasion. But if you do find an error, it’s time to get to work.

Step 2: Dispute any credit report errors

It can be worrying to spot an error on your credit report, but fortunately, the credit reporting agencies have a dispute process.

It helps to get organized, so start by gathering relevant documents that help your case before contacting the relevant credit bureau(s).

You can use our guide to credit reporting errors for each bureau’s contact information, some other steps you can take and even useful template letters for the process.

Step 3: Lower your credit utilization ratio

If you want pre-approval offers for new credit, it is best if you are not currently using all of your existing credit.

Your credit utilization ratio (CUR) determines around 30% of your credit score, making it the second most important factor behind your payment history. This ratio is the percentage of your revolving credit that you’re using at any given time, and financial experts recommend keeping this number at 30% or less — and preferably under 10%.

So, you may want to pay down your credit card balances if they’re on the high side.

Step 4: Make timely payments

Your payment history is the most important factor affecting your credit score. It accounts for roughly 35% of the entire score, meaning regular on-time payment is the best thing you can do for your credit profile, and late or missed payments are the worst things you can do.

If you could use some help hitting those due dates, consider using AutoPay to make your minimum payments — or better yet, pay off your balance in full every month.

How To Increase Your Chances of Getting Pre-Approved For a Credit Card

In addition to proactive steps like checking your credit report and disputing errors, there are ongoing credit habits that can improve your chances of getting a pre-approved credit card offer.

This includes continuing to keep your credit utilization ratio low and paying your bills on time, every time. But you can do other things to help.

Don’t open too many new accounts at once

Even though it’s good to have more credit than you actually need to use, don’t open a bunch of new accounts all at once. Every time you apply for a new account, a hard inquiry shows up on your credit report and stays there for up to two years. The impact of these can lessen over time, but too many too soon can signal to creditors that you might be in danger of racking up more debt than you can handle.

Don’t close old accounts

While you shouldn’t open too many new accounts all at once, you also shouldn’t close your older accounts. The average age of your open lines of credit makes up about 15% of your credit score. Keeping them active also affects your credit utilization ratio, because it’s credit you’re not using.

FAQs

How much does credit card pre-approval impact my credit score?

The credit card pre-approval process involves a soft pull on your credit, which has no impact on your credit score.

If you decide to apply for a card, it will likely trigger a hard pull, which can temporarily lower your score by around 5 to 10 points.

What’s the difference between pre-approved and pre-qualified?

When it comes to credit cards, the main difference between pre-approval and pre-qualification is who initiated it.

With pre-qualification, you’d likely enter information on a creditor’s web site to initiate the process and a soft pull on your credit.

With pre-approval, the lender would initiate by identifying you and reaching out with an offer. You may be able to check if you’re pre-approved online too, but the soft pull has already happened.

Can I be denied for credit after being pre-approved?

Yes, you can be denied even if you’re pre-approved for credit. Pre-approval doesn’t guarantee that you’ll be approved for credit. It simply means the creditor sees you as someone who is likely to be approved.

How can I improve my credit score?

Good credit habits like making consistent on-time payments, using less than 30% of your total available credit and keeping old accounts open could help improve your credit score and may help your chances of getting pre-approved credit card offers.

Bottom Line

Whether you simply want to understand a pre-approved offer you received in the mail or increase the odds of receiving one, it helps to know how the process works.

If you are proactively looking for a new credit card, you can check if you pre-qualify for a card from Credit One Bank. It only takes a moment to check and it doesn’t impact your credit.