The Impact of Pre-Approval on Your Credit

When you’re looking to get approved for a new credit card, one of the first steps many issuers, like American Express, offer is a pre-approval process.

But how does this process affect your credit score and overall financial health? Let’s break it down.

How Pre-Approval Affects Your Credit Score

Since pre-approval is based on a soft inquiry, there is no negative effect on your credit score. This means you can explore your eligibility for a card without worrying about damaging your score. However, it’s important to note that a hard inquiry during the actual application process will have a small, temporary impact.

Does Pre-Approval Improve Your Chances of Approval?

Yes, pre-approval can improve your chances of final approval. The process helps American Express identify potential candidates who are more likely to meet their credit requirements. However, this doesn’t guarantee approval when you move to the full application stage, as your credit will be reviewed more thoroughly at that point.

Why Should You Consider Pre-Approval?

• No Risk to Credit Score: Since it’s a soft inquiry, you won’t lose points on your credit score by checking if you qualify.
• Tailored Offers: Pre-approval shows you specific cards that match your financial profile, giving you a better idea of which cards you’re likely to be approved for.

What Happens if You’re Denied Pre-Approval?

If you’re not pre-approved, it doesn’t affect your credit score. However, it could indicate that your credit profile doesn’t meet the criteria for that specific card. It’s an opportunity to review your financial situation, check your credit score, and consider applying for a different card or improving your credit health.

The Difference Between Soft and Hard Inquiries

• Soft Inquiry: This happens during pre-approval and doesn’t affect your credit score. Soft inquiries are used to provide you with a more personalized offer without risking your score.
• Hard Inquiry: When you submit a full application for a credit card, the issuer will conduct a hard inquiry. This can lower your credit score temporarily, as it indicates you are actively seeking more credit.

What to Do After Pre-Approval

If you are pre-approved, this doesn’t mean you’re guaranteed the card. It’s a step toward a full application, which will include a hard inquiry. Be sure to check your credit report and ensure your financial profile is in good standing before moving forward.

If you’re denied or the pre-approval results are less than favorable, consider working on improving your credit score by paying down debt, lowering your credit utilization rate, and ensuring your credit report is error-free.