You may have often received messages stating that you have been “pre-approved” or “pre-qualified” for a credit card. Before acting on such messages, it is vital that you know what these terms mean and what the difference between the two is. These two terms are often used interchangeably. However, the truth is that pre-approved and pre-qualified are different stages in the credit card approval process. By knowing the difference between the two, you can make well-informed financial decisions and avoid falling into a credit trap.
What Does Pre-Qualification Mean?
When it comes to credit cards, pre-qualification is the first step applicants have to go through. This step involves a soft inquiry into your credit profile to check whether you are eligible to receive a credit card. It is important to note that a pre-qualification inquiry does not affect your credit score (also known as CIBIL score) in any way.
Features of Pre-Qualified Credit Card Offers
Whenever you receive a message saying that you have been pre-qualified for a credit card, you must know what this means. Banks may often send such messages to push their credit cards to the most eligible customers. Pre-qualification card offers are usually:
- Based on a basic enquiry of your financial status, such as income and credit score.
- Conducted using the method of soft inquiry, which does not affect your credit score.
- Meant to estimate your eligibility for a credit card based on the bank’s eligibility criteria.
- Followed by a complete credit check, which may affect your credit score temporarily.
What Is a Pre-Approved Credit Card?
Conversely, a pre-approved credit card offer involves a deeper inquiry into your credit history. In fact, this step in the credit card approval process means that the bank has already decided which credit card’s eligibility criteria you meet. However, you must note that this does not imply final approval for the card. For the final approval, you would still have to pass the final stage of the credit history inquiry.
Features of Pre-Approved Credit Card Offers
When you receive such a message, you need to know that this involves several parameters for which the bank has already qualified and approved you. They may have even decided which of their several credit cards best suits your financial status. Pre-approved offers usually:
- Indicates better chances of final approval because the bank has already screened your credit profile.
- Means you may be just one step away from getting the credit card.
- Comes with promotional offers customised to meet your financial needs.
- Involves a final step of approval by the bank.
Which Option Is Better for You?
Both pre-qualified and pre-approved credit card offers may be useful, depending on your needs. If you are just browsing and getting to know how credit cards work and do not wish for it to negatively impact your credit score, then a pre-qualified offer is better. However, if you have made up your mind about taking a credit card, then you should opt for a pre-approved offer instead.
How to Respond to Pre-Qualified and Pre-Approved Offers
Despite both offers being useful, you may not be able to avail yourself of them if you do not know how to respond to them.
- The first step is to read the terms and conditions carefully.
- Next, you need to check the credit score requirements to determine whether you will ultimately get the final approval.
- Simultaneously, you must also keep checking credit card offers from other banks.
- Finally, you should be mindful to read the fine print of any promotional offers attached to your credit card offer.
Final Thoughts
In conclusion, whether it is a pre-qualified or pre-approved credit cards offer, you should always be careful when accepting it. You should only opt for a credit card if you really need it and are financially capable of easily paying off the entire credit limit offered to you.
