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When you submit a credit card application, there's no guarantee you'll be approved. But you can receive a better idea of your approval odds if you submit a prequalification form or receive a preapproved offer in the mail.
Card issuers provide consumers with the opportunity to check if they may be approved for a credit card through prequalification or preapproval offers with no impact to their credit score. Prequalification and preapproval are both helpful tools that allow you to gauge the likelihood that you'll be approved for a card. And knowing what you're likely to be approved for will help narrow down what's the best credit card for you.
Below, CNBC Select reviews what the terms prequalification and preapproval mean, how they impact your credit score and how to check if you prequalify for a credit card.
The terms prequalified and preapproved are often used interchangeably. But there's a slight difference based on who's initiating the action.
Prequalified offers are typically initiated by consumers who want to see if they qualify for a credit card. Meanwhile preapproved offers are generally sent in the mail by lenders who prescreen potential clients to see if they meet the eligibility requirements.
The prescreening process differs by lender, but often the lender works with a credit bureau to pull a list of people who meet specific criteria, such as credit score requirements. Another way lenders prescreen new accounts is by using their existing customer base to find people who qualify for additional products, which may be why you receive preapproved offers from a lender you already bank with.
While both prequalified and preapproved offers represent the probability that you'll be approved for a credit card — they do not guarantee you'll actually be approved once you submit an official application. For instance, you may receive notice that you prequalify for a card, but later submit an application only to find out that you're denied. This can happen since lenders consider more than your credit history when making approval decisions. Other factors, such as your current employment status, income and monthly rent or mortgage payments all play a part in your approval decision.
If you receive a prequalified or preapproved offer, then submit an official application and are approved, the issuer is required to provide you a card with the same terms that were listed in the offer. This means key features of your card, such as the interest rate and annual fee must reflect what's stated on the offer. For this reason, many offers advertise a range of terms, such as interest rates from 15.49% to 24.49%. You will know the exact terms once you're approved.
Prequalification and preapproval don't hurt your credit score because the lender performs a soft inquiry (also called a "soft pull") of your credit history. This won't show up on your credit report or lower your credit score.
However, if you decide to submit an actual application, the lender will most likely check your credit with a hard inquiry (or "hard pull"). This appears on your credit report and may temporarily ding your credit score roughly five points, though it typically bounces back quickly.
Most major credit card issuers allow you to submit prequalification forms on their websites that ask for your name, address and the last four digits of your social security number. The issuer can use this information to perform a soft inquiry of your credit history and check if you qualify for a card.
Here are some issuers that allow you to check if you prequalify:
Keep in mind that when you submit a prequalification form, you may prequalify for several cards from that issuer. For instance, your results could say you're a great candidate for the Blue Cash Preferred® Card from American Express and the American Express® Gold Card. Once you see your options, you can choose which card to apply for based on your own personal spending needs and preferences.
Whether you fill out a prequalification form or receive a preapproved offer in the mail, these offers can be a good indication of your chances of being approved for a credit card once you submit an official application. But remember, they just mean you're more likely to be approved — it's not guaranteed. You can use these offers to shop around and compare credit cards, then apply for the one that qualifies you for the best terms.
For rates and fees of the Blue Cash Preferred® Card from American Express, click here.
For rates and fees of the American Express® Gold Card, click here.
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