Credit Card Pre-Approval
“Your Credit Card is Pre-Approved” – Have you ever received such messages on email or your phone?
Chances are you have received a dozen of these emails. The question on your mind must be “Do I accept or reject such offers?” Before we jump into that, let us see what Credit Card Pre Approvals actually mean.
What is Credit Card Pre Approval?
Credit Card companies always try to fish for new customers and increase their customer base. One of the most well-known tactics they follow is Credit Card Pre Approval.
In this tactic, Credit Card companies or banks first conduct a screening of customers who have a fair credit score. They do this by going through their database and listing customers who are eligible for a credit card. This is what is called a soft inquiry. It is on the surface level and your credit score is not impacted by this.
FFollowing that, an automatic mail is sent to you, letting you know you’ve been pre-approved and can now apply for a credit card.
Once you accept the offer and apply for it, the company conducts a second round of screening, where they will judge you on the basis of your credit accounts, check credit report, current salary, etc. If your credit history is not found up to the mark, your application is rejected, bringing down your credit score. This is called a hard inquiry and here, your credit score is impacted.
When should you say yes the offer?
Only accept the offer in the following cases.
- If you have a great credit score: Pre-approved Credit Cards are useful for people with good credit scores in the long run.
- When the credit card comes with benefits that can suit your lifestyle: compare credit cards, do sufficient research for better alternatives and select a card that suits your requirement.
Red Flags – When to reject the offer?
Be a smart customer! Credit Card Issuers use attractive benefits and rewards as bait. The important thing is to sit back and assess what they are trying to offer you. These are signs you need to look out for.
- Low-interest rates
- Lifetime free card.
- Too good to be true joining gifts
- High charges prior to receiving the credit card
- Lack of detailed contact information
- Ambiguity in terms and conditions
Issuers use terms that catch your eyes like “low-interest rates” and “Lifetime free cards” to lure you into thinking you have a chance at free access to money. These low-interest rates are often a trick as they make no difference because all banks need to provide competitive rates to battle it out in the market.
Do you need a Credit Card Pre Approval?
It is not advised if you have too many credit cards already and a poor credit history. Rather than accepting offers, you can directly go to your credit card company’s website and apply for a credit card. Some companies even allow you to see which credit cards you qualify for so that you don’t get rejected and impact your credit score.
How to apply for Credit Card Pre Approval?
Once you agree to the terms and conditions by the issuer, few documents are required to be submitted, which will initiate the hard inquiry.
- Proof of Income
- Proof of Residency
- Proof of Identity
- Copy of your PAN Card.
The sunny side of Credit Card Pre Approvals is that the issuer doesn’t actually have a deeper access to your credit history during the initial soft inquiry.
But once you submit the above-mentioned documents and apply for a card, the issuer can check the credit report and if you meet the issuer’s credit standards and have sufficient current income your chances of getting pre-approved are positive.
Pre-Qualification VS Pre Approval
Both Pre-Qualification and Pre Approval allow credit companies, working with the credit bureau to look at your credit history.
Although both of these terms have quite a number of similarities, there are certain important distinguishing points.
- The first step of Pre Approval is Pre-Qualification.
- Pre-Qualified card offers are generally directed towards a general credit score whereas Pre Approval Card offers may be more specified to meet certain criteria.
The differences between Pre-Qualification and Pre Approval Credit Card can vary heavily depending upon the issuer and the type of credit card.
Better safe than sorry! Not all Credit Card Pre Approvals are complete shams. However, appropriate research is required on your part where you must compare credit cards and look for better yet secure benefits/rewards. Ideally, you can be suggested to apply for credit cards if you are in dire need of one or you feel responsible enough to pay your bills in time. Although, instead of accepting these offers, you can always opt for the normal route by applying for the card yourself on a trusted card company’s website.
Remember, Credit Card Approvals do not always guarantee a credit card.