Many people receive prescreened credit card letters in the mail each day. While these letters may make it easier to sign up for a credit card through a specific company, they aren’t the same thing as a credit card approval. The following guide explores how prescreened credit card offers work.
A prescreened credit card offer is usually a letter or other notice that informs an individual that they have been pre-approved for a credit card. This pre-approval is not the same as a regular approval.
When you apply for a credit card, you’re usually required to fill out information on your income and basic finances. You’ll be asked for your driver’s license number, social security number, and several other pieces of personal information. This information is then used to run a hard credit check. In comparison, prescreened offers are determined through soft credit checks.
There’s a significant difference between hard and soft credit checks. A hard credit check can have an impact on your credit rating. Since hard credit checks are only done when an individual is actively applying for a new line of credit, an excessive number of hard credit checks on an individual’s credit file will have a negative impact on his or her credit rating. Since trying to sign up for lots of lines of credit in a short time could be a sign that an individual is experiencing financial difficulty, most credit rating agencies will consider an excessive number of applications a negative mark on a credit history report.
A prescreened offer on its own will not grant you a credit line. It won’t provide any line of credit on its own. Instead, it only provides a limited snapshot of your credit to loan companies. Under federal and state law, loan companies are legally allowed to run soft credit checks on an unlimited number of people. However, they can only run hard credit checks on people who have actively applied for a line of credit.
If you have received a prescreened offer for a credit card, there is no guarantee that you will qualify for that credit line. While it’s likely you will qualify, there can be many things that prescreening can’t detect. For example, most prescreening checks are limited in the information they provide. They don’t provide a ratio of an individual’s debt to credit, and they don’t provide a full history of all accounts that an individual has created.
It’s also important to remember that prescreened offers may not offer the best interest rates or terms for borrowers. Just being prescreened for an offer doesn’t mean you’ll get the lowest interest rate on a line of credit. Instead, it’s a good idea to comparison shop between different credit cards before applying for any single one.