Pre-Qualified vs Pre-Approved Credit Card Offers: What’s The Difference?

Introduction

Chances are you’ve received an email or letter saying you’re “pre-approved” for a new credit card. Or maybe you’ve visited a website and noticed a link to “pre-qualify” for their card by entering a few simple pieces of information.

If you’re like many people, you might have been confused by these two similar yet distinctly different terms. So then, what’s the difference between the two? Does either one mean you’re guaranteed a credit card? And what kind of effect would they have on your credit score?

These are exactly the types of questions to ask before you take action on either of these “pre-“ offers. So let’s dig in and uncover the answers to provide some clarity.

Pre-Qualified vs Pre-Approved

The answer is a bit different if we’re talking about mortgages and other loans. But for credit cards specifically, pre-qualified and pre-approved offers are distinguished by who initiated the process.

The short answer is you enter your information into a form to see if you’re pre-qualified. But a creditor sends you notification stating that you’re pre-approved. So from your perspective, pre-qualification is active and pre-approval is passive.

What Does It Mean To Be Pre-Qualified for a Credit Card?

If you’re shopping for a credit card, you’ll likely come across ads or webpages inviting you to “see if you pre-qualify” for a card. Clicking one of these links will take you to a form where you can fill out some basic information to find out your results. You’ll typically need to supply your name, address, email, Social Security number and date of birth.

When you fill out a pre-qualification form, you’re authorizing the credit card company to do a soft inquiry into your credit profile — also called a soft credit check or soft pull. Then you’ll see either a confirmation of how much credit you might receive, a recommendation for another card that’s better suited, or a message saying you won’t be approved for credit at this time. But the main point is that you initiate the process.

What Does It Mean To Be Pre-Approved for a Credit Card?

Pre-approved credit card offers seemingly come out of the blue. You’ll typically receive an email or letter telling you that you’re pre-approved for a credit card, with an estimate of what your credit line and terms might be if you apply. You’re essentially being invited by the credit card company to consider a product that they think you’ll qualify for because they’ve already done a soft check on your credit.

In fact, they’ll often have a whole list of prospects that they pulled from the credit bureaus, and you’re one of the lucky people on that list. But they initiate the process, and you only follow up if you’re interested.

Now, we should mention that there may be some overlap in the definition of “initiation” when a credit card company invites you to see if you pre-qualify for one of their credit cards. In that case, the creditor has identified you as a potential prospect for one of their cards but has not taken things to the next level by doing a soft inquiry to see if you’re pre-approved. Yes, they’re technically reaching out to you, but you’ll still need to initiate the process of allowing them to run a soft pull.

And there’s one more scenario worth mentioning. Some credit card companies offer the ability to run a check in their system to see if you already have an active offer with them awaiting your acceptance. If you do, it usually means they sent you a pre-approval letter recently — but you might have missed it or not received it yet.

If an offer pops up and you’re interested in taking advantage, just follow the prompts and complete the application. If you don’t have an active offer waiting, you’ll likely be invited to see if you pre-qualify for one.

Key Differences Between Pre-Qualified and Pre-Approved Offers

Yes, they’re similar. And also different. Here’s what sets pre-qualified and pre-approved credit card offers apart, along with the different credit inquiry types.

Does Pre-Qualification or Pre-Approval Affect Your Credit Score?

The pre-qualification or pre-approval process both involve a soft credit check, which does not affect your credit score. But in both cases, you still need to make a formal application to get the card. And the application itself will result in a hard inquiry.

A hard pull may lower your credit score slightly, but it’s typically no more than 5 points for each inquiry. And the ding is temporary, so your score will probably bounce back within a few months. If you submit multiple applications within a short period of time, the impact will multiply — unless it’s for auto or home loans, which get grouped together within a certain timeframe.

The assumption with cars and houses is that you’re shopping around for the best rate, and obviously that involves more than one inquiry. But with credit cards, making multiple applications looks like you’re just desperate to get more credit. And that’s a big red flag for lenders.

For quick reference, these are the main differences between soft and hard credit checks.

Why Pre-Qualified or Pre-Approved Offers Are Useful

The beauty of pre-qualified and pre-approved offers is that they allow you to see which credit cards you may be able to get without impacting your credit score. This is a great way to shop around and compare cards that you might qualify for. Then you don’t have to commit to submitting an application until you know the details.

This strategy is especially helpful if you’re looking to build credit and improve your credit score. When you have limited or negative credit history, your options are often minimal. But seeing if you pre-qualify gives you a good idea of what credit lines you can get and with what rates. That lets you assess which card offers are best suited to you.

Without being able to see your pre-qualification or pre-approval status, you’d have to fill out an application for any card you’re interested in. And that would trigger multiple hard pulls, which would likely lower your credit score.

Can You Still Be Denied After Being Pre-Qualified or Pre-Approved?

One thing both pre-qualified and pre-approved notifications have in common is that neither guarantees you a credit card.

You might be thinking that if creditors are reaching out to you with pre-approved offers, they should be a pretty sure thing. After all, they already checked your credit with a soft pull, right? But no, they still need to do an official analysis of your full and current credit profile.

Once you actually apply for a card and authorize the lender to do a hard inquiry, they’re likely going to look closer at your credit reports. And they may see things they didn’t in their original soft inquiry. Or your credit or income picture may have changed since they last examined it.

Let’s say you’ve missed several payments on other accounts since the credit card company did their soft inquiry. Or you lost your job and no longer have the steady income you did a few weeks ago. Or maybe you’ve been applying for several different credit cards, maxed out your current credit lines, or even declared bankruptcy.

Anything could have happened between the time they took a quick peek and the time you finally submit an application. And many of these things can make you look like a higher-risk applicant than you did a few weeks ago.

The bottom line is that you may get the card you apply for, you may be offered the same card with less-favorable terms (like a lower credit line or higher interest rates), you might be offered a different card as an alternate, or you could be denied outright. It all comes down to your current credit score, what’s in your credit reports, and what your income situation is at the time you actually apply.

Having said all that, your odds of being approved for credit after receiving a pre-approval notification is around 80-90%. So it’s not a guarantee, but it’s still pretty high.

Best Practices Before You Apply

Here’s a quick checklist you can refer to before you apply for a new credit card.

• Check your credit score. You may be able to get it for free from your bank or current credit card company. Otherwise you can purchase your score from one of the credit bureaus. 
• Compare multiple offers and card terms. Don’t just go for the first offer. See if you can get better terms, like lower interest rates or higher credit lines, from another card. 
• Understand credit card rates. The interest rate on a credit card is called the annual percentage rate (APR). It’s common to see credit card APRs in the 25-30% range, but you probably don’t want to consider anything much higher than that. Of course, if you always pay off your balance in full, and the card comes with a grace period, you might not ever have to pay interest. 
• Calculate the fees and rewards. Most credit cards come with annual fees, so you need to weigh the pros and cons to figure out whether the annual fee is worth it. Also consider any late fees or other fees the card may have. And then compare all that to what you might be able to earn back in points or cash back rewards. 
• Consider using online checker tools. Not only will you find pre-qualification tools on most credit card websites, but you may see card finder or comparison tools as well. These can be helpful for narrowing down your options based on your interests, preferences and credit score.

Pre-Qualified and Pre-Approved FAQs

You might have some of the same questions as other consumers. These are the answers to some frequently asked questions about credit card pre-approval and pre-qualification.

Does pre-approval mean I’m approved?

No. Pre-approval means the creditor thinks you could be a good fit for an offer, based on a preliminary check of your current credit report and score. But you’re not approved or denied until you go through the full application process.

Why do I still need to apply after being pre-approved?

Pre-approval could occur several weeks or more before you end up deciding to apply for an offer. What matters is your credit profile at the time of application, and many things could have changed in that time span. So while pre-approval gives you a good idea of your chances, a creditor can’t approve you until you formally apply.

Which banks offer the best pre-qualification tools?

Not all banks send pre-approval offers, but most have the option to see if you pre-qualify before you apply for one of their cards. The key is to find a card that you think fits your credit profile, situation, and buying habits first. At that point, any pre-qualification tool is the best one for you.

Bottom Line

Both pre-approval and pre-qualification offer benefits when you’re looking for credit. Think of them as tools to help you research credit card offers without affecting your credit score. Once you know your “pre” status, you can apply for the card you want with some level of confidence.

The best strategy is to research different credit cards that are recommended for your specific credit score range. Then go ahead and see if you pre-qualify for any or all of them, and take note of the estimated terms. Also consider the rewards structure, if any. If you get a pre-approval offer in the mail, you can compare those terms and benefits to the others as well.

Resist the urge to apply for multiple cards if you want to improve your credit score. However, once you decide on a card that works best for your needs, you can confidently submit an application for just that one.

Your credit score may take a slight hit in the short term. But if you get the card and make consistent, on-time payments, that initial drop should be more than offset by the positive payment history you build.