A lot of times in the past you must have received text messages or e-mails stating that you have been pre-approved or pre-qualified for a credit card or a loan. We know, sometimes you get confused when you see these messages because you start doubting if you’ve applied for a card in the first place. The best credit cards in India generally have a high parameter and thus requires you to have an excellent credit score and the right documents and if you already have all of these sorted then there is a possibility that you have come across these notifications on your phone saying that you have been pre-approved or you are pre-qualified for a credit card. Pre-approval and pre-qualification are similar terms, but they mean different things and can be defined differently among different lenders.
In today’s blog, we will try to answer some of these frequently occurring questions like What does pre-approval for a credit card mean? What does pre-qualification mean in the case of credit cards? Do pre-approval and pre-qualification mean the same thing? Lets’ say that you have been pre-approved or you’ve pre-qualified for a credit card, does it ensure that you have been guaranteed a credit card of your choice? To get into the crux of all these confusions, let us first try to understand the meaning of both these terms.
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PRE-APPROVED FOR A CREDIT CARD
No matter how similar these two terms may sound, many lenders may use both these terms interchangeably as it entirely depends on the parameters set by them. In the case of Pre-approval, the lender usually goes through the credit history of random people from their database and based on that the lender sends mailers and messages to all those people. These mailers are automatic and although these might give you a better chance of getting approved, there is no such surety that you will not get rejected upon a hard check of your credit score. Once a hard check is performed by the lender there is a possibility of your credit score falling after being rejected.
PRE-QUALIFIED FOR A CREDIT CARD
Pre-qualification generally means that the lender has made a soft check on your credit score, upon which the lender has decided that you deem fit for a credit card. It means that the lender has worked with the credit bureau and looked at your credit history after which they have decided that you are the kind of borrower they want to have as a customer due to your credibility in the past. Lenders generally have a set standard like a minimum credit score that you must qualify, so the credit rating agency provides the list of people who meet the criteria.
IMPACT ON CREDIT SCORE
Pre-approvals are generally determined by your credit history, a trend that you have followed in the past. The inquiries made in this case are mere soft inquiries and do not affect you’re your credit score.
Pre-qualification is a soft inquiry on your credit report and may appear as an “inquiry”. This soft inquiry will not have an impact on your credit score. Only if you apply for the credit card and a hard inquiry is it performed. Then that will have an impact on your credit score.
PREQUALIFIED V/S PREAPPROVED: Similarities and Differences
- Both Pre-qualified and Pre-approved credit card offers do not mean a hard inquiry on your credit report. Only when you apply for a card, will it impact your credit score.
- None of these offers come with any kind of surety that you will get a credit card; you will have to apply for the credit card to get approval.
- Neither of these offers comes with a plastic card – again, you will have to apply for that to happen.
- Pre-approval and pre-qualification both signify that the chances of getting the credit card are high.
- Meaning and usage of pre-approval and prequalification vary from lender to lender. Both can mean different things to different lenders and might have set parameters accordingly.
- Once you have applied for a pre-qualified or pre-approved credit card. It will result in a hard check on your credit report which may have a negative impact on your score.
- We suggest you read the terms and conditions thoroughly before applying for a pre-approved or pre-qualified credit card.
- It is possible to apply for a pre-approved or pre-qualified loan from the bank’s/lender’s website proactively, this will save you from a hard inquiry. So, you can apply for the card of your choice without getting a hit on your credit score.
It is important for you to read all the terms and conditions before you apply for a pre-approved or a pre-qualified credit card. Also, even if you are pre-approved it is advised to apply for the card from scratch. Also, it is important to know that the pre-approved or pre-qualified offers are not necessarily the best offers in the market. Thus, we would suggest you do research on other products as well before you apply.
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