Nowadays, it is quite common to receive phone calls or emails from banks saying that you are one among the few chosen eligible candidates for a pre-approved credit card. The offer seems exciting, but soon you end up wondering if a pre-approved credit card is legitimate and how it can impact your credit or CIBIL score.
So, does that mean you should reject the offer or take it up right away? Or even more importantly, are you actually in need of a credit card? If you do not have an answer to any of these questions and are unaware of the pros and cons of owning a pre-approved credit card, read on.
This article will give a clear idea of the benefits of a pre-approved credit card, how they can impact your credit report, and much more.
How do pre-approved credit cards work?
If you have received a pre-approved credit card mail, that doesn’t mean the card will be issued to you right away. It means that the credit card company has pre-vetted you with the help of a method referred to as “soft inquiry” to go through your credit score and report. You still have to apply for the pre-approved credit card, and there is no guarantee that it will be approved.
Once you have successfully applied for the credit card, your credit report will be subjected to a second round of checks by the lender. As per the lender, if your credit report fails to match the required criteria, your credit card application will be rejected. Not just that, your CIBIL score will be lower temporarily.
Can a pre-approved credit card offer impact your CIBIL score?
The simple answer to this is, no. Pre-approved credit card offers won’t affect your credit or CIBIL score. That’s because it is simply a trick used by credit card issuers to gauge your eligibility.
However, your credit score can be affected if you go ahead with the application. Unlike the former situation, the lenders will place a ‘hard pull’ on your credit report, which is in no way close to a ‘soft pull’.
What are the benefits of pre-approved credit cards?
Pre-approved credit card offers come with a number of benefits, including:
With a pre-approved credit card, you don’t have to go out searching for the right ones. The lenders will approach you, while you’re at the ease of your home. All it takes is a good credit score and report, and you may acquire great credit cards with several rewards and other benefits.
A pre-approved credit card is a key to rebuilding your credit score. Even if you have a poor credit score, credit card companies can still reach out to you, offering a limited credit line which is ideal for rebuilding your overall credit report. However, it is always advisable to go through the interest rates, before you take up the offer.
Are you looking for credit cards that offer travel rewards or other perks? In that case, a preapproved credit card is ideal for you to figure out if you may qualify for any of these cards.
Since lenders have approached you to advertise their credit card, chances are that you might qualify for better or lower interest rates than you’d find without a pre-approval.
Things to know about pre-approved credit cards
Here are a few things you must learn about pre-approved credit cards before you decide on applying for one.
•If your pre-approved credit card application gets rejected, it can impact your CIBIL score.
•“Lifetime credit cards” or “interest-free credit cards” are marketing strategies only meant to attract customers. These offers come with limited validity.
•Lowering the annual fee for a credit card is just a temporary discount. A permanently free credit card is a myth.
•Beware when the expiration date of a credit card approaches. You may find yourself tangled in various types of scams. Chances are that the card issuers might not provide you with a piece of legitimate contact information, or even refrain from stating the terms & conditions.
When should you get your hands on a pre-approved credit card?
Now that you have a clear picture of what pre-approved credit cards are and how they work, you can tell that pre-approval is a trap to entice customer into selling a credit card. But this shouldn’t stop you from acquiring one.
If you manage to pass the second screening test, you will be fully qualified to avail your credit card. However, you must keep in mind a few things, before you get your hands one.
Before anything else, ask yourself if you really need a credit card. In case, you have a good CIBIL score and need a pre-approved credit card, you should go for it. But, if you have existing debts on your other credit cards, you shouldn’t consider taking another one as that will ultimately hamper your credit report.
Another thing you should consider is your financial condition. That will determine if you can afford a pre-approved credit card at all. Even though credit cards come with lots of offers, there are several other fees and interest rates no one will warn you about. Also, make sure to consider a few pointers such as policy documents, customer reviews, etc. related to the particular credit card that you are planning to apply for.
The bottom line
To sum it up all, credit card pre-approvals aren’t that bad. In fact, it is an indication of a good credit and employment history. That said going for the first pre-qualified credit card is not something that is highly recommended. Instead, slow down and take out the time to do extensive research and then apply for cards that offer maximum benefits.