Prequalified vs. preapproved: what an offer actually promises

“Prequalified” and “preapproved” do not mean different things in law, and issuers use them interchangeably. What matters is where the offer came from. A prescreened mailing built from a credit bureau list is a “firm offer of credit” under the Fair Credit Reporting Act whichever word it uses. An eligibility check you run on an issuer’s website is an estimate. A flyer with neither behind it is an ad. None of them guarantees approval, but the first two are worth more than the third.

How a prescreened offer gets to you

The issuer decides who it wants, for example people with a score above a cutoff and no recent late payments, and asks a credit bureau (Equifax, Experian or TransUnion) for a list of consumers whose files meet those criteria. The bureau supplies names and addresses; the issuer mails or emails the offers. The FTC’s guide to prescreened offers describes the process and notes that prescreening does not hurt your credit score. The bureau records an inquiry showing which company got your information, but only you see it, and it does not count against you.

Because the list came from your credit file without your asking, the FCRA attaches conditions. The offer must be a firm offer of credit, and it must tell you how to stop future ones.

What “firm offer” actually commits the issuer to

Under the FCRA’s definition (15 U.S.C. 1681a(l)), a firm offer is one the issuer will honor if you meet the specific criteria it used to select you. The law then allows three conditions:

1. Criteria from your application that bear on creditworthiness, such as income, as long as the issuer set them before it selected you.
2. Verification that you still meet the selection criteria, using a fresh look at your credit report or the information in your application.
3. Collateral, if the requirement was set in advance and disclosed in the offer.

So a prescreened offer can still end in a denial. If a late payment, a new maxed-out card or a lower income appeared since the list was pulled, you may no longer meet the criteria. The FTC puts it this way: since you were prescreened, only under limited circumstances would you be turned down. That is a stronger position than an ordinary application, and weaker than a promise.

How to tell which kind of offer you have

Ignore the headline word and look for the notice. Regulation V (12 CFR 1022.54) requires every written prescreened solicitation to carry two pieces of text:

• A short notice on the front of the first page, in type larger than the main text and no smaller than 12 point, saying you can opt out of prescreened offers and giving the toll-free number.
• A long notice elsewhere in the mailing under the capitalized, underlined heading “PRESCREEN & OPT-OUT NOTICE,” explaining that information in your credit report was used and that the offer can be withdrawn if you no longer meet the criteria.

If the mailing has that notice, it is a prescreened firm offer, whether it says prequalified, preapproved or “selected.” If it has no notice, it was not built from your credit file and tells you nothing about your odds.

Online checks are a third category. When you enter your details into an issuer’s “see if you’re pre-approved” tool, you started the request, so the result is an estimate from a soft inquiry rather than a firm offer under the prescreening rules. It still has value: it costs nothing on your score, and it reflects your current file rather than one pulled weeks ago.

Which offers are worth acting on

A prescreened offer or a positive online check is a reasonable signal, but it is not a reason to apply on its own. Before you do:

1. Decide whether you need the card. An offer arriving is not a job for the card to do. If you are getting your first card, our guide to first credit card approval covers which types to try.
2. Check that nothing has changed since the offer was made: no new late payments, no jump in balances, no drop in income.
3. Run the issuer’s own soft-pull check if it has one, even if you hold a mailed offer. It uses today’s file.
4. Read the terms in the offer itself. A firm offer can quote a range of APRs or credit limits, and your actual terms are set after you apply.
5. Accept that applying means a hard inquiry. The cost is small for most people and is covered in what a hard inquiry really costs. Several applications in a short span cost more, because card applications are not combined the way mortgage or auto loan shopping is.

If you are denied anyway, the issuer must send an adverse action notice within 30 days of your completed application, with the reasons or your right to get them. Our guide to why credit card applications are denied explains how to read it.

How to stop prescreened offers

You can take your name off the prescreening lists at all three bureaus with one request, a right the FCRA gives you. The FTC lists two options:

• For 5 years: go to optoutprescreen.com or call 1-888-5-OPT-OUT (1-888-567-8688).
• Permanently: start the process at the same site or number, then sign and return the Permanent Opt-Out Election form you receive.

Opting out does not affect your credit score and does not stop you from applying for any card you want. It also cuts the volume of preapproved mail that can be stolen from a mailbox and used to apply in your name.