What to keep in mind as credit offers arrive

For some, the notices arrive by mail all the time: “You’ve been pre-qualified for a ____ line of credit/credit card/loan.” These companies are sometimes relentless in their pursuit of your business and don’t stop sending these offers even when you ask for them to.

This is also the case for “preapproval” offers. Just what is the difference between the two? And is receiving them a good or bad thing? Here are some things to keep in mind with pre-qualifications and pre-approval offers:

Prequalifications are a thumbs up

When you receive a prequalification offer, it means that your credit has been gauged as good enough to likely be approved for the stated offer. For example, if you receive an ad saying “You’ve been selected among likely participants to qualify for a credit card starting at a 5.99 percent interest rate and up to $5,000 limit,” it basically means you’re a good candidate for this offer, if you decide to apply.

Of course, there are no guarantees you’ll get the promotional interest rate or even be approved for the entire offer. Take these offers with a grain of salt, unless you’re thoroughly interested in getting a new credit card or loan. Just be sure to read the fine print before you apply.

Preapprovals are green lights

Preapprovals are more straightforward. They often involve filling an application and a credit check. Once a review has been completed, an offer is then given to the individual seeking the line of credit. It isn’t always necessary to accept the full amount of the preapproval, just whatever you need to complete the purchase. Preapprovals most often occur with auto loans and mortgages.

The takeaway

Gauge whether you want to act on either a prequalification or preapproval offer. A prequalification offer may be too good to pass up but it doesn’t always mean you can afford to take on the temptation another credit card. They also expire after a certain date. A preapproval can similarly have long-term effects. Remember, each time you apply for a preapproval, your credit is checked. That can hurt your credit report down the line.

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