What Are Pre-Approved Credit Card Offers

By Matt Jackson

Introduction To Pre-Approved Credit Card Offers

The average household receives around three items of junk mail on a daily basis. Many of these often unwanted items are credit card offers from various different lenders promising pre-approved credit cards that can be applied for immediately. While it may appear, at first glance, that this is simply a method to encourage anyone to sign up this isn’t necessarily true. In some cases you have genuinely been pre-approved to a certain extent.

Why Lenders Pre Approve Borrowers

Bulk mail typically shows little more than a 2% response rate when sent to large marketing lists. This can prove costly, with some lenders reporting that it costs them as much as $250 or more for each new account they sign. To try to reduce this cost, lenders try to target their audience as much as possible as possible and choose potential borrowers more likely to complete the application form and more likely to be accepted.

The Role Of The Credit Bureau

Credit card companies tend to send marketing lists to the credit scoring companies and ask them to confirm which meet certain criteria. Generally, this means reaching a certain credit score. Consumers that do have the desired credit score are then included within the mailing list and approached as a pre-approved applicant.

The Final Credit Check

It is important to note that while your credit score will have been checked and you are being approached as a pre-approved applicant, this is no guarantee that you will actually be approved. Credit scores go out of date very quickly. Once you complete the pre-approved application and forward the application form to the credit card company they will still run a credit check to determine your viability. Even the slightest changes in personal circumstances can see your application denied.

Low Interest Rates And High Credit Limit Offers

Another important point is that pre-approved credit card offers generally promise interest rates starting as low as x% and credit limits up to $x. These are the extremes that may or may not be offered. In reality it is highly unlikely that you will be offered either the lowest interest rate or the highest credit limit straight away.

Sub-Prime Lenders

Some lenders specialize in offering credit to consumers with less than a perfect credit score. These lenders will specifically target people with a lower credit score because they offer higher interest rates and greater charges. Even sub-prime lenders targeting those with a low credit score will conduct a final credit check and consider information such as your salary before offering any credit.

Opting Out Of Pre-Approved Applications

Not everyone wants to receive these offers and it is possible to have your name excluded from searches conducted by the credit bureaus. You may still receive general marketing leaflets and letters but you should no longer receive the numerous pre-approved card applications that currently fall through your letterbox.

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