Let me guess what a big chunk of your junk mail consists of. Anything connected to credit card offers…?
Yes, you are not the only U.S. resident who gets those preapproved or prequalified offers in the mail.
Do you ever wonder what it means to be preapproved or prequalified for a credit card offer?
Let me explain.
What does it mean to be preapproved or prequalified for an offer?
Credit card issuers like marketing their credit cards. If you get an exciting letter in your mail slot announcing that you are preapproved or prequalified for a welcome offer, you are that much more likely to apply for the card. That’s a marketing tool.
Being preapproved or prequalified for an offer essentially means that the credit card issuer had a look at your financial and credit standing and accordingly, is informing you that you have a chance of getting approved for their card.
You may have noticed that I’ve been interchanging three terms; preapproved, prequalified, and pre-selected. However, being preapproved is a stronger term than being prequalified or pre-selected. Preapproved indicates that the credit card issuer deemed you eligible for the offer. However, it does not guarantee you will get approved, as we’ll discuss further in the post.
Prequalified or pre-selected indicates that according to your financial information, you have the potential of getting approved for the card.
Where do the credit issuers get my personal info from?
Before you freak out or get upset, let me point out that the credit issuer does not literally review your credit report. Instead, they ask the credit bureaus for a list of consumers who fall into a preset category, according to factors on the consumer’s report.
For example, they ask for a list of all consumers who have credit scores above 720, a clean payment history, and no credit card balances over 9% credit utilization.
The credit issuers then preapprove or prequalify the consumers on the pre-screened list.
Credit card issuers will not approach the credit bureaus and ask for your financial and credit background because it is illegal for the credit bureaus to release that sort of information to a third party, such as credit bureaus, thanks to the FCRA.
Firm offer of credit
What is the FCRA? The FCRA is the statute that forbids the credit bureaus to release your info to a third party.
Instead, the FCRA created an alternative. A creditor is permitted to purchase a list of pre-screened consumers from the credit bureaus, as long as the creditor will extend a Firm Offer Of Credit to the consumers on the pre-screened list.
A firm offer of credit expresses that the creditor will approve the consumers on the pre-screened list should they apply for the credit card, as long as their credit information doesn’t change from when they were pre-screened for the offer and that their income and expenses qualify for the offer.
So am I guaranteed for approval if I am pre-screened?
That sounds great. All I have to do is hope to be on a pre-screened list and then I can get approved for the credit card?
It is not quite so. If you are prequalified, or even preapproved for an offer, you are still not guaranteed to get approved for the card.
The credit card issuer can always get out of approving you for the card by saying that factors on your credit report changed since they pre-screened you or that your income and expenses don’t qualify for the offer.
So much for a firm offer of credit.
But the good news is that even if you are not prequalified or preapproved for an offer, you may still be a candidate for the card and you can still apply for it, just like any other consumer.
You can check if you are preapproved or prequalified on your own
Many credit card issuers, aka banks, have online tools to check whether you prequalify for a credit card offer. You can try those tools on your own. The credit card issuer will scan your credit report in the form of a soft pull, which does not affect your credit.
Keep in mind that when you make use of those online, self-check tools, you are giving consent to the credit bureaus to share your information with the bank. Therefore, the FCRA law doesn’t cover the prequalification and the firm offer of credit does not apply. In such a case, the credit card issuer doesn’t owe you anything in terms of approving you if you apply for the card.
An additional tool to check if you are preapproved or prequalified
This credit card database is another place where you can check if you would prequalify for an offer. You can scroll through the data that is being reported by users who apply for credit cards. You can figure out according to your own credit score and credit history if you would prequalify for the card offer, based on the reported approvals for the same card. Hundreds of users report their approvals and rejections for the credit cards they apply for so that you can make an educated guess if you would get approved for a card or not.
The database even gives you the average credit limit users were approved for and the average credit scores of the users who were approved for the cards.
Just as the other free tools we spoke about earlier, the credit card database is not under the FCRA law.
I had enough of the preapproved offer cards, how can I stop the mail?
Even good things have their limits. It is nice to know that the bank selected you as eligible for their card but too much preapproval is just, well, too much.
If you want to opt-out of receiving preapproved or prequalified offers in the mail, you can always opt-out online.
This will stop random credit card issuers from sending offers to you. However, you may still keep getting offers from the banks you have a relationship with. They are getting your information from their system since you bank with them and they have it all. They are not going through the credit bureaus and therefore, even if you opt-out of being pre-screened for offers, it has nothing to do with them.
Here’s to many good offers and approvals!