Sometimes in the mail or email, depending on what financial institution you bank with or have worked with, you may receive specific pre-approved and pre-qualified offers for credit cards. These offers can be exciting as they are often coupled with introductory offers that can mean extra rewards or 0% interest rates for the first few months. But what exactly does pre-approved vs. pre-qualified with credit cards actually mean? And are they different from one another? Below you will find more information on credit card pre-qualification and pre-approval.
Similarities Between Pre-approved and Pre-qualified
Depending on which credit card company you talk to, pre approved and pre qualified may have pretty similar definitions. Generally, pre-approval and pre-qualification involve the same process; a lender will look at your credit profile from one or more credit bureaus. And if you are even a partial match to what they are looking for from borrowers, they will send you an offer for their product. Put simply, pre-approved and pre qualified credit cards are both pre-screened credit card offers. When you are pre-approved or pre-qualified for a credit card, your approval odds are higher than someone who was not pre-qualified or pre-approved.
The Main Difference Between a Pre-approval Offer vs. Pre-qualified Credit Card Offer
Although some credit card companies may use the terms pre-approval and pre-qualified interchangeably, there can be differences with others. For some companies, pre-approval may mean that they viewed criteria related to your general financial habits, things that show up on a credit report, such as your payment history. While pre-qualification may mean a company viewed your credit score and determined you meet their minimum credit score criteria.
Keep in mind that you still need to complete a formal application with any of these offers. You can head to the credit card company’s website or sometimes apply for a card over the phone. This formal application process will include verifying your personal information and okaying a hard credit check.
Finding the Best Credit Card Deal From Your Offers
When you have a credit score range that falls within the good or excellent credit category, you will likely receive many credit card offers in the mail or by email. Let’s say that it is a good time for you to open up a credit card and you are actually looking. Because of your excellent credit scores, get several offers from major credit card issuers. Here are some things you should compare between credit cards to find the best offer:
The APR (The Interest Rate)
The APR of a credit card should be a significant factor when determining what credit card you want to go with. APR is the percentage of interest that will be charged each billing cycle on the balance of your credit card. Remember, credit card interest rates are compounding, so you will pay interest on interest (which will be charged to your account) in addition to the principal amount. The higher your balance, the more interest you will be charged.
Think About Your Main Goal With a Credit Card
Another essential thing to consider is the perks of a credit card, depending on what plans or goals you may have. For example, if you are planning a huge trip, you may want to choose the credit card with the best travel rewards. Or, if you are trying to pay off debt, you may want a card that allows for balance transfers. Here are some standard perks that you can find with different credit cards:
Lots of credit cards come with travel rewards. These can be points towards flights, hotel stays, car rentals, restaurants, and more. If you travel a lot for work or fun, you may want to consider at least one travel credit card—it can mean free upgrades, huge discounts, and free stuff!
0% Interest Rates for an Introductory Period
If you are thinking of a one-time large purchase you know you can pay off in a few months, a 0% introductory interest rate offer may be the right credit card option. With this introductory offer, you won’t have to pay any interest for a given amount of time—usually 12 months/a year. And so financing a large purchase you know you can pay off before this period can mean no interest!
Low Interest or 0% for Balance Transfers
Balance transfer credit cards allow you to pay off other credit card balances so you can have one single monthly payment and one interest rate (in some cases, 0% interest). If you are someone who is struggling with credit card debt, like many Americans are, a balance transfer card can be an excellent solution for more manageable payments and savings on interest! Also, you may see a credit boost after completing the transfer.
Cash Back on Everyday Purchases
If you are planning on using a credit card to earn rewards over time, you may want to consider a card that offers rewards for everyday purchases. This could include things like gas, groceries, and purchases from major retailers. With this reward, you will likely earn around 3% to 5% cash back on almost all your purchases. It may not seem like much, but over time this could mean hundreds or even thousands of dollars back.
Have a major retailer or brand that you like to shop with often? Then a store-specific credit card can help you save a ton of money. Store-specific credit cards come with unique perks catered to the store. Depending on how much you shop, you can look forward to significant discounts and promotions.
The Credit Limit
The credit limit on your credit card is another crucial factor to consider when choosing between financial products. With a high credit card limit, you may see a boost in your credit score, as it will increase your available credit. On the other hand, if you struggle with credit card spending and know you won’t be able to use your credit card wisely, then a significant credit limit may not be suitable for you.
Before you choose a card from a pre qualified or pre approved offer, make sure you check the details on that credit card online to read all the fine print and details, as most mail-in or emailed offers may not have all the financial information you need. You can contact the credit card issuer for clarification if you have any questions.
Improving Your Chances for Pre-approval and Pre-qualification?
If you haven’t gotten any pre-qualified or pre-approved credit card offers, you may be curious about why that isn’t happening for you. Credit card pre-qualification and pre-approval offers largely depend on your financial details. Your lender reviews specific criteria regarding your credit score, credit history, and income. And so, if you haven’t received any offers, it is likely because your credit score needs improvement. You can always still apply for credit cards even with bad credit! But having good credit does help with approval. Here are some things you can do to improve your chances of prescreened offers:
- Make Your Payments on Time — One of the most important things you can do for your credit is to make your payments on time. On-time payments account for 35% of your credit score—the most important factor!
- Keep Your Credit Utilization Ratio Under 30% — Your credit utilization is the ratio between your debt and available credit. Keeping that ratio under 30% can really help your credit score while going over that percentage can hurt it.
- Pay Off Your Existing Credit Card Debt and Loans — Another thing you can do to help your credit score is to pay off as much credit card debt and loans with monthly payments as possible. There are several debt repayment strategies out there that can help you pay off debt quickly.
- Avoid a Hard Credit Inquiry Right After One — Consecutive hard credit inquiries can hurt your score, and they may be a red flag for lenders, so try and avoid them if possible.
- Keep Paid off Accounts Open — It may be tempting to close accounts after you pay them off, especially with revolving accounts like credit cards. However, closing accounts will lower your available credit, which will hurt your credit score. Additionally, older accounts look good on your credit reports. So, keep those paid accounts open!
- Build Your Credit Portfolio — Another thing that will reflect well on your credit score is having a good mix of credit accounts. Having a diverse portfolio shows lenders that you have experience handling different types of credit accounts.
How Many Credit Cards Are Too Many?
Getting a lot of credit card offers may tempt you to open several credit cards, especially if you don’t already have any. At this point, you may be wondering how many credit cards you should have. Most Americans have an average of six credit cards, and having more or less than that number may or may not be a bad thing depending on a few factors:
- The Balances on Each Credit Card — Having a high balance on your credit cards when you have multiple will definitely hurt your score.
- Your Credit Mix — If all you have in your credit mix are credit cards, it can hurt your credit profile’s diversity. And so, keep that in mind when applying for credit card options!