PREQUALIFIED vs. PREAPPROVED: Understanding the Difference

When it comes to prequalification and preapproval, there are distinct differences between the two. Let's take a closer look at each of them and organize the information for better understanding.

PREQUALIFIED:

Prequalification is a fast and less detailed process in which a lender assesses your credit profile. There are two major types of prequalification in the credit card space.

1. Mail Offers:

- These offers are unsolicited and sent by banks to market their cards or products.

- Prequalification in this context does not necessarily mean you meet specific criteria.

- These offers are often from subprime institutions and should be approached with caution.

- They are primarily aimed at individuals with low credit scores who may be easily enticed by marketing tactics.

- Prequalification through mail offers is not a reliable representation of your approval odds.

2. Online Prequalification Tools:

- These tools, directly provided by the bank, are more trustworthy and accurate.

- Using these tools allows the bank to perform a soft pull on your credit, indicating their interest in offering you a credit card.

- It is advisable to use the prequalification tool on the same day you plan to apply for a credit card.

- This increases your chances of getting an instant approval or higher credit limit.

- However, prequalification is still not a guarantee of approval, but it significantly helps in assessing your eligibility.

PREAPPROVED:

Preapproval involves a deeper check on your creditworthiness and indicates that you are highly likely to be approved for a specific product.

- Preapproval is usually offered by institutions where you already have a banking relationship.

- High daily balances in your account can increase your chances of receiving preapproved offers.

- Preapproval is based on internal data that the institution has on you.

RARE ALTERNATIVES:

Apart from the common prequalification and preapproval processes, there are unique methods used by specific banks.

1. AMEX "Apply with Confidence" Tool:

- This tool guarantees your approval odds without impacting your credit score with a soft pull.

- It is primarily available for new customers, and future credit card applications with Amex may also result in soft pulls.

- Freezing your Transunion credit profile can help avoid unnecessary inquiries.

2. CHASE "You're Already Approved" Language:

- Chase often displays banners in their "My Offers" section indicating that you are preapproved or already approved.

- These offers are more reliable, and accepting them usually results in an instant approval.

- Chase typically performs a hard pull on Experian for these offers.

Understanding the difference between prequalification and preapproval can help you make informed decisions when applying for credit cards. Remember that while prequalification can provide insights into your eligibility, it does not guarantee approval, whereas preapproval indicates a higher likelihood of approval.

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