Prequalified vs Preapproved Credit Cards: What’s the Difference?

Are you confused by the terms “prequalified” and “preapproved” when it comes to credit card offers? You’re not alone. Many people use these terms interchangeably, but they actually represent different stages in the credit card application process. Let’s dive in and clarify the distinctions between prequalified credit card and preapproved credit card offers.

Understanding Prequalification

When you see a prequalified credit card offer, it means the issuer has done a preliminary review of your credit profile and determined that you meet certain basic criteria for the card. Prequalification typically involves a soft inquiry on your credit report, which doesn’t impact your credit score.

Here’s how the prequalification process usually works:

1. You provide some basic information to the card issuer, such as your income and monthly housing payment.
2. The issuer does a soft pull of your credit report to get an overview of your creditworthiness.
3. Based on this initial assessment, the issuer may extend a prequalified credit card offer, indicating you have a good chance of approval if you apply.

It’s important to note that prequalification is not a guarantee of approval. Think of it like an informal invitation to apply for the card. The issuer is saying, “Based on what we know so far, it looks like you could be a good fit.”

Decoding Preapproval

Preapproved credit card offers, on the other hand, indicate a higher likelihood of approval. In this case, the issuer has proactively reviewed your credit profile, often using data from credit bureaus, and determined that you meet their criteria for a specific card.

Key aspects of preapproved offers include:

• Issuer-initiated: Unlike prequalification, where you express interest first, preapproved offers come to you unsolicited.
• Prescreening: Issuers use a prescreening process to identify potential customers who fit their target profile for a particular card.
• Targeted terms: Preapproved offers often include specific terms, such as the credit limit and APR, based on your credit profile.

While a preapproved credit card offer suggests you have a very good chance of being approved, it’s still not a 100% guarantee. You’ll need to submit a formal application, which usually involves a hard inquiry on your credit report.

Prequalified vs Preapproved: A Comparison

Let’s summarise the key differences between prequalified and preapproved credit card offers:

Scenarios and Examples

To make these concepts more relatable, let’s look at a couple of scenarios:

Scenario 1: Priya’s Prequalified Offer

Priya is interested in getting a rewards credit card. She visits the websites of a few major issuers and fills out their prequalification forms. A couple of days later, she receives a prequalified offer for a card with a ₹500,000 limit and a 3% cash back rate on all purchases.

Priya’s experience illustrates how prequalification works:

• She expressed interest first
• The issuer did a soft credit check
• The prequalified offer gives her a general idea of the terms she could expect

Scenario 2: Rahul’s Preapproved Offer

Rahul receives a preapproved credit card offer in the mail. The offer is for a travel rewards card with a ₹1,000,000 limit, a ₹5,000 annual travel credit, and a 50,000-point sign-up bonus. The APR is listed as 15.99%.

Rahul’s case demonstrates the key features of a preapproved offer:

• The offer came to him unsolicited
• The issuer prescreened his credit profile
• The offer includes specific terms based on his creditworthiness

Choosing the Right Credit Card

Whether you receive a prequalified or preapproved offer, it’s essential to evaluate the card based on your financial needs and habits. Consider factors like:

• Rewards: Look for a card that aligns with your spending patterns and offers rewards you’ll actually use, whether it’s cash back, travel miles, or points.
• Fees: Understand all the costs associated with the card, including the annual fee, balance transfer fee, cash advance fee, and foreign transaction fee.
• APR: If you tend to carry a balance, prioritise cards with a low ongoing APR. If you always pay in full, the APR is less crucial.

Remember, just because you’re preapproved doesn’t mean a card is right for you. Always read the fine print and crunch the numbers to ensure the card fits your financial lifestyle.

Boost Your Approval Odds

While prequalification and preapproval can give you a sense of your approval odds, there are steps you can take to improve your chances:

• Check your credit score: Knowing where you stand can help you target cards that fit your credit profile. You can check your score for free on the Airtel Thanks app.
• Pay down debt: Lowering your credit utilisation ratio can give your score a boost and make you a more attractive applicant.
• Fix errors: If you spot mistakes on your credit report, dispute them with the credit bureaus. Inaccuracies can drag down your score.

By proactively managing your credit, you can increase your likelihood of credit card approval.

Your Next Steps

Now that you understand the difference between prequalified and preapproved credit card offers, you’re better equipped to navigate the world of credit. Remember, these offers can be useful tools, but they’re just a starting point.

Before you apply for any credit card, take the time to:

1. Assess your financial needs and goals
2. Compare offers from multiple issuers
3. Read the terms and conditions carefully
4. Check your credit score and report for accuracy

The Bottom Line

Whether you’re prequalified or preapproved, the final decision on your credit card application depends on a thorough review of your credit history, income, and other factors. However, these early indicators can help you narrow down your choices and apply with more confidence.

If you’re ready to take the next step in your credit journey, consider checking your prequalified credit card offers or responding to a preapproved credit card invitation. And remember, responsible credit habits like timely payments, keeping your balances low, and avoiding excessive applications can go a long way in improving your credit score over time.

At Airtel Finance, we’re committed to empowering you with the knowledge and tools to make smart financial decisions. Explore our wide range of credit card offerings tailored to your unique needs and lifestyle on the Airtel Thanks app. With a few taps, you can check your prequalified offers, compare benefits, and find the perfect card to fuel your aspirations. Start your journey to better credit today!

FAQs

1. Does getting prequalified for a credit card hurt my credit score?
   No, prequalification typically involves a soft inquiry on your credit report, which does not impact your credit score.
2. If I’m preapproved for a credit card, am I guaranteed to get approved?
   While preapproval suggests a very high likelihood of approval, it’s not a 100% guarantee. You’ll still need to submit a formal application.
3. How long does prequalification take?
   Prequalification is usually a quick process, often providing results within minutes of submitting your information.
4. Can I get preapproved for a credit card with bad credit?
   Preapproval is less common with subprime credit cards designed for those with bad credit. However, some issuers may have prequalification tools that can help you see if you’re likely to qualify.
5. How do I know if a credit card offer is prequalified or preapproved?
   Issuers typically use the terms “prequalified” or “preapproved” explicitly in their offers. If you’re unsure, contact the issuer directly for clarification.