Getting a pre-approval for credit can be exciting, especially if the offer is for a low-interest credit card or amazing rewards program. But for many applicants, that excitement is short-lived.
You can get denied for a credit card even if you were pre-approved. It seems unfair to apply for credit believing you’ve finally found the help you need to build up your life. Getting turned down is disheartening, especially when a credit card company reached out to you first.
Here’s what you need to know about pre-approvals and what you can do going forward to avoid credit denial.
The Truth About Pre-Approvals
The term ‘pre-approval’ isn’t the same as ‘approval.’ Credit card companies use a screening process to find candidates that might be a good fit for their products.
Here’s what that look like:
- Banks contact credit bureaus (e.g. Equifax, TransUnion, etc) to find candidates that meet specific criteria for their products.
- The bureau provides a list of consumers that match the request and records a “soft request” of those consumers.
- The bank sends an offer to the candidates provided by the bureau.
- Consumers respond to the offer.
- Banks use the application to see if candidates actually meet the requirements for the product.
In other words, candidates are deemed “pre-approved” and encouraged to apply for the product. This gives banks and lenders the green light to look into a candidate’s credit worthiness to determine their real eligibility for the product.
What Pre-Approvals Aren’t
Before we dive into the reasons you could have been denied, it’s important to know what pre-approvals are not. First and foremost, they are not guaranteed offers. You may have found out the hard way that pre-approvals require more information than lenders can obtain on their own. Rather, they base your pre-approval status on general criteria, but must verify other information before you can be approved.
Also, pre-approvals do not affect your credit. Banks cannot look at your credit unless they receive permission from you. The information they request from credit bureaus is documented as a soft inquiry and is not visible to anyone who checks your credit except yourself.
The Fair Credit Reporting Act forbids companies to look into your information without your permissions, which is why you don’t receive ‘approved’ offers instead of pre-approvals.
Why You Were Denied After a Pre-Approval
If you’ve been denied, it could be for a number of reasons:
- The most common reason is that you no longer meet the product’s requirements. This could be because your credit or information has changed from the time the bureau collected it until the time you applied for the offer.
- Consumer reports change every day. If anything was added or removed from the time they pulled your credit reports to the time you applied, that could be the reason for your denial.
- If you’ve moved or had your name changed, the credit card company may reject your application.
- Racking up charges on other accounts, making numerous inquiries to your credit, increasing your debt, or making a late payment could be enough to have your application denied as well.
What to Do Next
It’s disheartening to have a promising credit offer rejected, but you’re not without options.
First, you can opt out of receiving prescreened offers to avoid getting your hopes up.
The best thing you can do is take a look at your credit score report to see why you were denied. The card issuer will send you a copy of your credit score that influenced the decision. You can also request a credit score report for free to verify the information is correct.
Annualcreditreport.com gives you a free look at your credit report once per year. If you find any inaccurate information within the report, you must dispute them to have them removed from your credit history.
Doing so can give you a better chance of getting a favorable response on the next offer.
Got questions? Send them my way and I’ll be happy to share them in an upcoming blog or video.
Can you dispute if you were denied in a “pre-approval” offer?
Hi, if you have a preapproval and applied for a full credit pull, which resulted in an inquiry on your credit report, you can dispute if any errors exist. If you did not do a full credit put, and an inquiry is not on your credit report, there is nothing to dispute, you can call them for reconsideration, however, your credit report was never impacted if a credit inquiry did not occur.
Hi – I submitted one application to refinance my auto loan (and was denied after being preapproved) but got 3 inquiries to my credit report. Is that normal? There is no phone number listed for these companies (at least not on credit karma) and after calling different numbers on google I was unable to get a live person on the phone. How can I dispute these?
Hi Alicia, you can pull your annualcreditreport.com to view the number there and inquire about it. The inquiry is required to show who saw your report. The approval/denial is a separate thing, that is a business decision; so the inquiry can report no matter if you were denied or approved. I’d call just to see why you were denied, specifically, if you’re not already aware. It should be on your denial letter as well, which you should get in the mail.
If you are pre-approved online by say, Experian or Credit Sesame, are pre-approved in real time, then apply 1 minute after they’ve done the soft inquiry, and are denied, can you dispute the inquiry on your report? I know my credit score did not change within 30 seconds of applying and now there is an additional inquiry on my report. Is this standard practice?