You get a letter in the mail saying you've been pre-approved for a credit card. You read through the details and it all sounds good, so you decide to apply. Then, word comes back that your application has been denied. What happened?

While it may have seemed like a sure thing, getting pre-approved for a credit card (or "pre-qualifying," which is slightly different -- we'll get to that shortly) isn't a guarantee that you'll be approved. Here's a look at what these terms really mean.

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Pre-qualification vs. pre-approval

Some people think that "pre-qualified" and "pre-approved" can be used interchangeably, but this is not the case. Pre-qualifications are initiated by you. If you go to a credit card issuer's website and check to see which cards you might qualify for, it'll do a quick scan of your credit report with a soft inquiry, so your credit score will not be affected. Then, the website will provide you with some recommendations based on your creditworthiness. The card issuer might also hold on to this information and use it to send you credit card offers in the mail months or even years later.

Pre-qualifications are quick, and they indicate which cards you might qualify for, but the issuer is not offering you any guarantees. If you choose to apply for the card, the issuer will do a hard inquiry, which will take a closer look at your credit report and can lower your credit score by a couple of points. The card company will also request information about your income level. In this in-depth evaluation, the issuer might spot something it hadn't seen in its pre-qualification that bars you from being approved.

Pre-approval, on the other hand, is closer to a guarantee. This is where the card issuer reaches out to you, even if you've never expressed any interest in its credit cards, and offers you a card based on your credit history and income level. Pre-approvals also use soft inquiries, so they won't hurt your credit. If you choose to apply for this card, the chances are very good that you'll be approved. The only reason this wouldn't happen is if your credit takes a dive between when you're pre-approved and when you apply.

Should you apply for a pre-qualified credit card?

It's up to you whether you should act on a pre-qualified or pre-approved credit card offer. Before you do, though, you should read the cardholder agreement carefully so you understand exactly what you're getting. Look at the card's fees and interest rates and compare these with the other cards in your wallet to see how they stack up. Evaluate the rewards, too, and make sure they line up with your spending habits. If you like the card, follow the instructions included in the pre-qualified offer to apply.

If you don't like the credit card, don't just throw the offer in the trash. It's best to shred the document. That way, an identity thief can't get hold of it. The offer contains a special code that is linked to you, and if a thief were to get hold of this and other personal information, like your Social Security number, they may be able to open a fraudulent account in your name.

And if you dislike getting the credit card offers altogether, you can opt out of them for five years, or permanently, by going to You can also choose to opt back in at any time if you decide you'd like to receive credit card offers again.

Finding the right credit card can be pretty overwhelming, and pre-qualification offers can help you to narrow your focus. But it's important to understand what pre-qualification is and is not. You also need to evaluate the offers thoroughly to ensure that you know what you're getting.