Every time you apply for a credit card, an inquiry shows up on your credit report. That means that, even if you’re not approved, you’re impacting your credit score. As a result, you may end up less likely to be approved for a credit card than you were in the first place.
You can do better. Prequalifying for a credit card doesn’t impact your credit score, and can give you an idea of the type of product you’re eligible for. Pre qualify credit cards online, through the mail or on the phone – it’s easy to do and easy on your credit. Here’s how to do it.
What is Prequalification?
When you apply for a credit card, the bank that issues that card will perform a hard inquiry on your credit report. Those inquiries can last for two years or more on your report, and can lower your credit score by as much as two points per inquiry.
When you prequalify credit cards, the bank will only perform a sot inquiry. That means the issuing bank will look at your report, get a general feel for you credit and bill payment history and determine your chances of being approved for a credit card. There is no impact on your credit score.
Prequalification for a credit card doesn’t automatically mean you’ll be approved. However, if you prequalify, there’s a very high likelihood that you will be.
How to Prequalify for Credit Cards
Prequalification is becoming more and more commonly available by banks and lenders. In fact, most of the major issuers offer some option to prequalify. Sometimes you can prequalify by filling in basic information online, while other times you may have to call customer service.
As you shop for credit cards, wait a moment before you apply. Determine which card best fits your lifestyle – do you need a lower interest rate? Would you prefer to accumulate points or airline miles? Narrow your search down to two or three cards you like best.
Then, determine whether those cards offer prequalification. Usually, prequalification is something similar to an application. You’ll enter your name, your social security number (or the last four digits) and your address. Be sure to list a street address, as PO boxes aren’t usually approved.
Within just a few minutes, you’ll see that you’re either prequalified for your credit card or will get a message saying, “Sorry, we couldn’t match you with an offer at this time.”
If you are prequalified, you can feel confident as you apply that your approval odds are very good.
Can You Be Declined After Prequalification?
Sometimes, a credit card company will say you’re prequalified, but your full application is declined. There are a number of reasons this might happen.
Remember that a prequalification is the result of a soft inquiry. The issuing bank only gets an overview of your financial landscape when you seek prequalification. When you submit the complete application, the lender will perform a hard inquiry.
A hard inquiry does stay on your credit report for several years, and will give the bank a better idea of your debts, history and obligation. As mentioned, there are a few reasons you may be declined for a card, even if you’ve been prequalified.
The first reason is that your debt to income ratio is not acceptable to the bank. If the lender determines that you don’t make enough income to take on additional debt, you may be denied credit.
If you are missing information on your application, or if your information doesn’t match your credit report, this is also cause for denial. Be sure you double check your application for accuracy before you submit it to the lender.
Another common reason for denial after you prequalify credit cards is multiple applications. If you’ve already applied for the card within the past 30 days, there’s a good chance you won’t get approved this time, either.
Why Should You Prequalify Credit Cards?
Once again, every full credit card application is a hard inquiry on your credit report. These inquiries can cost you points off your FICO score, and can decrease your odds of being approved for cards. Because prequalification doesn’t impact your credit score, it’s considered a “safe” way to explore your credit options.
Keep track of your credit score using a service like Credit Karma, Experian or your bank. Then, as you shop for credit cards be sure to read the fine print. Most lenders will indicate a credit score range which is likely to be approved for the card.
Once you have a general idea of what the lender is looking for, you can begin the prequalification process. Choose the cards you like best, and the lenders that will be comfortable with your credit score. Then, go ahead and submit the prequalification.
Only once you’ve been prequalified should you submit the full application to the lender. This prevents the lenders from seeing multiple inquiries on your report, and prevents your score from dropping.
Where to Go to Prequalify Cards
There are quite a few banks and lenders that offer prequalification. One of the most well known is Bank of America. You don’t need to have a bank account with Bank of America to qualify for a credit card. Just visit their website and enter your information to see if you’re prequalified.
Discover is another site which offers credit card prequalification. You’ll have to fill out a bit more information than with other lenders, including your housing status and monthly rent or mortgage payments. Once you complete the form, you’ll be given a list of products for which you’ve been prequalified.
Finally, there are the third party sites. Sites like Credit Karma and CreditCards.com track your personal information and use your financial history to recommend cards that might be of value to you. There are many of these sites on the internet and they’re fun and easy to use. Just remember – never pay for a credit card prequalification.