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Preapproved vs. pre-screened card offers: a big difference

By Erica Sandberg
Published: July 23, 2014

Opening Credits
Columnist Erica Sandberg
Erica Sandberg is a prominent personal finance authority and author of "Expecting Money: The Essential Financial Plan for New and Growing Families." She writes "Opening Credits," a weekly reader Q&A column about issues for people who are new to credit, for CreditCards.com.

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Question Dear Opening Credits,
I was just reading an article regarding "pre-screened" credit card offers. In the article, it says that getting approved for the credit card is ALMOST certain. So I wanted to fill out an offer from Capital One for a Platinum MasterCard. My only concern is that I'm 20 years old, and don't have any credit history. Plus, I noticed on the terms and conditions that I'm not eligible for such an offer if I don't have a credit history with one of the three major credit bureaus. So I guess my question is, am I really "preapproved" for such a credit card regardless of what the terms say? I really don't want to get rejected again for applying for a card, especially since I heard that rejected credit card applications lower your credit score even before it exists.  
-- Ozzy 

Answer Dear Ozzy,
At first glance, any letter from a credit issuer can seem like an official invitation to a hot new nightclub. Yet when you arrive, you may be rudely turned away. Then, to make matters worse, the bouncer sends out a notice that you had the nerve to show up, which lessens your chances of getting into other venues, too!

For this reason you have to read such correspondence carefully. It could be a prescreened offer, meaning the creditor checked your credit profile thoroughly. However, there's no clear cut way to tell if you've been pre-screened or just preapproved. The term "preapproved" has little meaning -- it means you've been approved to send in an application. Big deal.

I suspect this is the case for you, that what you received is merely an invitation to apply. The creditor asked the credit agencies to send them the names of people who fit a basic credit profile. So while you may possess enough of the requirements to generate such a marketing letter, acceptance is by no means guaranteed.

The Capital One Platinum MasterCard is for people with average credit and as you noted, one of the requirements is sufficient activity listed on a consumer credit report. Even if you've never had a credit card, though, you may have enough information in your credit file to qualify. For example, you could have a car or student loan that you've been treating responsibly. Your steadily declining balance and on-time payments would be recorded, marking you as a strong candidate for the card.

On the other hand, if your reports don't indicate any activity, the odds are strongly against qualification. In that case, don't bother going any further; you won't get in. If you did try, they would send information to the credit agencies that you applied for credit and an inquiry would be placed on your file.

For someone in your position, such an inquiry can ding your credit rating especially harshly. Inquiries are a minor component of a FICO score (a risk score that lenders use to determine qualification and set terms), but if you don't have much favorable data on your credit reports at this stage, it would carry greater weight than it would for people with established credit histories.

To bypass the velvet ropes, only pursue accounts for which you are almost certainly eligible. You've done the right thing by closely analyzing the content of the letter, because you immediately identified the element that might prevent you access. Don't rely on mass mailings, not just because they may be little more than advertisements, but because they represent only a tiny portion of the credit cards on the market. Instead, become an informed and active shopper.

If you do have loans, you also have credit reports and scores, so find out what your FICO scores are to see where you stand. You can get your scores at myFICO.com for about $20 per credit agency. After that, scan the offers that correlate with your numbers -- "Excellent" is 750 to 850; "good" is 700 to 749; "fair" is 650 to 699; and "poor" is 600 to 649. Anything below 599 is considered to be "bad." Home in on an account that looks like a perfect fit, make sure you have an income to support the credit line and apply. I would also encourage you to pull your credit report once a year for free from each of the big three credit bureaus at annualcreditreport.com

See related: What exactly is a pre-screened offer?, How inquiries imact credit scores

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