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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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.
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
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.
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.
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.
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.
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