Why You Should Take Credit Card Pre-Approval With a Grain of Salt

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Pre-approval doesn't have the final word.

Almost every time I check my mail, I'm greeted with a virtual forest's worth of paper from multiple credit card issuers proclaiming I've been pre-approved for this or that product. Even if you haven't received a snail-mail invitation to apply, you can check most issuers for your pre-approval credit card options.

Getting pre-approved for a credit card can be a great confidence boost when filling out your application. And not getting pre-approved can definitely knock the wind out of your metaphorical sails.

But is that boost actually justified? And should you avoid cards if you weren't pre-approved for them? Getting pre-approved can be a good sign, but it's not the end-all-be-all of credit card approval. Read on to find out more.

What is credit card pre-approval?

In finance, you run into a number of phrases that sound the same but have different meanings. "Pre-approval" is one such phrase.

When you're talking about mortgages, pre-approval means your credit has been checked, loan amounts calculated, and interest rates set. But if you're talking about credit card pre-approval, well, the entire definition changes.

In most cases, credit card pre-approval simply means you meet the general target demographic for a given card. This typically consists of a soft credit check that looks at the very basics of your credit profile. You won't know your credit limit or interest rates -- or even if you're approved at all -- until you fill out a full application.

When you actually apply, the issuer will perform a hard credit check that looks at all the details of your credit report. You'll also need to provide your income to show you can repay your balance. Anything uncovered during a more thorough look into your finances could influence whether you're approved.

Can you be pre-approved and still be rejected?

A credit card pre-approval offer is based on a very limited view of your finances. So, you could be pre-approved, but your credit history or income could cause the issuer to double back with a rejection. Some of the most common reasons you could be rejected despite a pre-approval include:

  • Your income isn't high enough. If the issuer doesn't think you make enough money to pay off your balance, they're likely to turn you down.
  • You already have too many cards. Many issuers limit how many credit cards you can open with them. And a few issuers limit how many new accounts you can have in a given time period. Exceeding these limits earns an instant rejection.
  • You've reached your credit cap with the issuer. Most card issuers will cap the total amount of credit they'll offer you. If you've reached that limit, you won't get any additional credit from that issuer.

If your credit card application is rejected, the card issuer should send you a letter explaining why. If it's something you can address right away, it could be worthwhile to clean up your issues and then call for reconsideration. However, some problems, like too many new accounts, can only be solved by waiting it out.

Can you get a card even if you weren't pre-approved?

Credit card pre-approval is vague. Just as pre-approval doesn't guarantee approval, you could not be pre-approved for a credit card and still apply successfully. In fact, this very thing happened to me not that long ago.

I used Chase's pre-approval page to check for any potential pre-approval offers. Despite having a high credit score -- and being under Chase's 5/24 limit -- the pre-approval page didn't uncover a single Chase card. I know I have a strong credit profile, but even so, I stopped to think about whether I wanted to go through with my application when no pre-approved offers popped up.

I'm glad I did. After a nerve-racking 60 seconds, I got that coveted acceptance screen. Even though I wasn't pre-approved by mail or by net, I still had a brand new Chase credit card coming my way.

Credit has no guarantees

The difference between the pre-approval process and the application process is night and day. Your credit profile might look okay at first glance, but a deeper dive could uncover any number of things that make the issuer think twice about approving your credit card application. (Think of it like the difference between a nightclub in the evening -- and one in full daylight.)

On the other hand, the algorithm's quick glance might not give it enough information to see what a great applicant you are, while a longer look could unveil your true awesomeness.

In other words, while credit card pre-approval is nice to have, it's definitely not the last word. If you've done some research into a specific card and think you have what it takes to get approved, it can be worth applying, pre-approval or no pre-approval.

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