Everyone is familiar with those letters in the mail from credit card companies offering "pre-qualified" or "pre-approved" cards. Sometimes the cards even appear to have favorable terms. For those who have a less than stellar credit score, or for those looking to improve their personal finance through credit repair, these cards can have some initial appeal. However, it is important to understand what these bulk-mailed offers actually are, and what "pre-qualified" and "pre-approved" actually means.
What Pre-Qualified Offers Really Are
Believe it or not, there actually is a difference between pre-qualified and pre-approved offers. A pre-qualified offer that you receive in the mail is little more than an acknowledgement that your credit score falls within a particular range. These offers are typically sent out to millions of people who fall into a particular category, such as "FICO score between 600 and 650" or "no delinquent payments in the past 3 years". While these offers might technically be possible, there is basically zero guarantee that you will get anywhere near the terms of the offer in the piece of mail you opened.
What Pre-Approved Offers Really Are
Pre-approved offers are technically different than pre-qualified offers. A pre-approved offer that you receive in the mail is typically a bit more targeted than a pre-qualified offer would be. Usually when you receive a pre-approved offer, it means that the bank or lending institution that sent the offer looked at your particular credit score and determined that you qualified for the offer they have mailed you. However, the big caveat to this is that these offers are pre-approved based on your credit score at the time they approved the offer, which often is weeks or months before you actually receive the letter in the mail. If your credit situation has changed at all, you might not qualify, or they might significant change the terms they ultimately offer you.
What are the Downsides of Pre-Qualified and Pre-Approved Credit Card Offers?
One important thing to remember when discussed pre-qualified and pre-approved credit cards is that they are, first and foremost, a marketing tool being used by a bank or financial institution. This means that the company offering the card expects to make a profit from their interaction with you. Often times, the deals you are offered (or, more importantly, the deal you are ultimately offered if you express interest) is far from the best deal you could find if you sought out a credit card yourself. On top of that, by replying to the mailer, your credit will receive a "hard hit", which can damage your score.If you are trying to repair credit, remember that responding to any of these credit card offers will result in a "hard hit" on your credit report, so be very wary about which offers you reply to, if any at all.
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