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Matters Pecuniary ... credit cards, banking, debt management, |
What preapproved and prequalified credit card offers really mean
It can be exciting to find out that you’ve received a credit card offer. Usually these letters, emails, or website notices state that you’ve been “preapproved”, “prequalified”, or “pre-selected”. But, these prequalification and preapproval messages do not always mean that you’re actually approved for the credit card. They are “prescreened” offers and they’re usually accompanied by a disclaimer very similar to the one below that Citi provides with its “pre-selected” offers.
“The offered credit may not be extended if, after you respond to this offer, we determine that you do not meet the criteria used to select you for this offer or any other applicable criteria bearing on creditworthiness, or if you do not provide the required collateral.”
Examining pre-screened offer notices
There’s been plenty of debate about the fairness of these types of pre-screened offers. Some consider this marketing strategy deceptive and “bait and switch”. But, let’s examine the pre-screened offer notice.
The first part of the disclaimer states that the lender could refuse to extend the offer to you if you no longer meet the initial criteria that they used to preapprove you for the offer. For instance, let’s say that the company pre-approved you because you had a credit score of 700. If you decide to accept the preapproval offer, but your score is no longer at least 700, you could be declined because your credit score is below the company’s minimum requirement.
In the pre-screened notice, the second part of the first sentence states that there may be other criteria that could affect your eligibility. This statement is likely the reason that some people consider pre-screened offers as deceptive. They see this as a loophole for creditors to decline applications or to not provide as much credit as the advertised offers. While there are undoubtedly deceptive pre-screened offers, for the most part, there’s a valid reason that pre-screened offers aren’t always what they initially appeared to be. The likely culprit is the applicant’s income.
Until you specify your income, the credit card company isn’t able to assess your ability to repay any credit that they may extend to you. After you provide them with this key piece of information, they could rescind their offer of credit if they determine that you don’t have sufficient financial resources to take on the debt that you may incur with their credit card.
The last part of the notice indicates that you could also be disqualified if you don’t provide the requested collateral. This would likely apply secured credit cards that would require a deposit and loans that typically require some form of collateral.
How to proceed with preapproval offers
Before deciding to apply for the next credit card that you’re preapproved for, you should also consider contacting the credit card company to find out what their underwriting criteria is and what is involved in the application process.
You should also ask if there is any collateral that would be required. If there is, be sure to get details on the type and amount of collateral as this may affect your decision to apply at all.
Whenever possible, get everything in writing or recorded. This is important because preapprovals sometimes result in a hard credit inquiry when the company reviews your credit to determine if there have been any changes to your credit profile. If the company has a chat feature, get the lender to commit to what they’re telling you in writing. Most financial institutions record their phone calls. So, if you’re misled about the application process (intentionally or not) and your application results in a hard credit inquiry, the recorded call could be used to help you get the hard credit inquiry removed.
How to stop receiving pre-screened, prequalification, and preapproval offers
If you wish to not receive pre-screened offers at all, there are a number of ways that you can opt-out.
Online:
Phone:
1‑888‑5‑OPTOUT (1‑888‑567‑8688)
Mail:
Experian Marketing Services
Attn: Opt‑out Services
P.O. Box 80128
Lincoln, NE 68521
Equifax Options
P.O. Box 740123
Atlanta, GA 30374‑0123
TransUnion
P.O. Box 505
Woodlyn, PA
19094‑0505