Pre-Qualified versus Pre-Approved

[Anonymous]

Hello,

I recently received a pre-approved offer from Belk.  I accepted the offer and received the card with a $300 limit.  Yesterday I received a "pre-qualified" offer from JC Penney's.  I have several accounts through GEMB and I have never been late or had any other issues.  They have been pretty good to me as I have worked hard to rebuild my credit over the last 7 years after a Chapter 7 Bankruptcy.

My question is this...  what is the difference between pre-approved and pre-qualified? 

Thanks!!

[jmbfl]

A pre-approved offer means that, hypothetically, they have already approved you for credit. However, that pre-approval is subject to you meeting the current underwriting criteria at the time you put in your application and they pull your credit. So, it is possible that you could be declined even if you are pre-approved.

A pre-qualified offer means that the issuer has obtained a marketing list, most likely from the CB's, of individuals who meet certain credit criteria. Generally speaking the listed people will upon application and further scrutiny meet the current underwriting standards and be issued cards. However, the issuer does not know the details of your CBR until you actually apply, so there are any reasons why the issuer might decline you even if you are pre-approved. You could, for instance, have a sufficiently high score, but open collections, lates or too high a UTIL to meet the underwriting standards, in which case you would be declined even though pre-qualified.

In both cases it is possible that your credit may have changed for the worse since they compiled the list of offerees, in which case you would be denied credit.

Practically speaking pre-approved is stronger that pre-qualifed, but there is very little difference. You can be declined after receiving either type of offer!

[moonman]

I have applied for some pre-qualified offers but was counter-offered for another card so sometimes pre-qualified is not as bleak as it sounds.

[MattH]

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@jmbfl wrote:

A pre-approved offer means that, hypothetically, they have already approved you for credit. However, that pre-approval is subject to you meeting the current underwriting criteria at the time you put in your application and they pull your credit. So, it is possible that you could be declined even if you are pre-approved.

A pre-qualified offer means that the issuer has obtained a marketing list, most likely from the CB's, of individuals who meet certain credit criteria. Generally speaking the listed people will upon application and further scrutiny meet the current underwriting standards and be issued cards. However, the issuer does not know the details of your CBR until you actually apply, so there are any reasons why the issuer might decline you even if you are pre-approved. You could, for instance, have a sufficiently high score, but open collections, lates or too high a UTIL to meet the underwriting standards, in which case you would be declined even though pre-qualified.

In both cases it is possible that your credit may have changed for the worse since they compiled the list of offerees, in which case you would be denied credit.

Practically speaking pre-approved is stronger that pre-qualifed, but there is very little difference. You can be declined after receiving either type of offer!

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I believe the main reason why many lenders pre-qualify instead of pre-approve is that it's less costly.  Pre-qualify means they say something like, "give us addresses of people in the following zipcodes, with FICO scores between X and Y, with average age at least Z..." and get back just the list.  Pre-approve means they say something like, "give us complete files on the following people," which gives them much more data but also costs more per record.