Is getting preapproved for multiple credit cards a good idea?
Quick insights
- It's possible to be preapproved for multiple credit cards, which may allow you to review a variety of options and choose one that best fits your personal situation.
- Being preapproved for a credit card indicates that you meet the lender’s preliminary requirements for a credit card, but it doesn't guarantee final approval.
- Applying for credit cards can temporarily lower your credit score, as each application generates a hard credit inquiry during the application process, whether you’re ultimately approved or not.
Credit card preapproval is a process where credit card issuers perform a soft credit check on your credit report to determine if you're likely to qualify for a certain card. While the allure of multiple preapprovals might seem like a golden opportunity to optimize your credit options, navigating multiple offers can be tricky.
Introduction to credit card preapproval
The credit card preapproval process typically doesn't impact your credit score and it doesn’t guarantee approval. Rather, preapproval simply means that you meet the issuer's basic criteria. The final decision depends on a more thorough review of your financial situation, resulting in a hard credit check. Understanding the nuances of credit card preapprovals may help you make informed decisions that align with your financial goals.
Difference between preapproval and prequalification
Credit card preapproval and prequalification are both methods used by lenders to assess a potential borrower's creditworthiness before they formally apply for a credit card, but they differ slightly in their approach and implications:
- Preapproval: Credit card preapproval, based on a soft credit check, is typically initiated by the lender who sends you an offer indicating that you are likely to be approved if you apply based on preliminary credit information. This is often seen in "pre-approved" offers you might receive in the mail. Like prequalification, preapproval does not affect your credit score and does not guarantee final approval, but it may suggest a higher likelihood of approval upon completing a formal application.
- Prequalification: Credit card prequalification involves a soft check into your credit report to assess your likelihood of approval should you decide to apply. The main distinction is that prequalification is typically initiated by the consumer to check their potential eligibility for a card without impacting their credit score. Prequalification is generally less formal and doesn't guarantee approval, but it gives you an idea of what cards you might qualify for.
Both processes can be helpful for gauging your chances of getting a new credit card without the need for a hard credit pull, which can affect your credit score.
Can you be preapproved for multiple credit cards?
Yes, it's possible to be preapproved for multiple credit cards. Issuers may send out preapproval offers to attract new customers. There are a few things to consider when reviewing preapproval offers:
- These offers are typically based on a snapshot of your credit profile and indicate that you meet the basic criteria for the card.
- Factors such as a good credit score, stable income and a history of responsible credit use may increase your chances of receiving multiple preapprovals. However, preapproval doesn't guarantee final approval when you formally apply for the card.
- While multiple preapprovals may give you more credit card options to explore, it can be important to carefully consider each offer before moving forward. Preapproval does not result in a hard credit inquiry, but applying for a card does; as such, applying multiple cards in a short period of time can negatively impact your credit score.
Should you apply for multiple credit cards if preapproved?
While there is no clear yes or no answer to this, there are some potential drawbacks to consider when applying for multiple credit cards:
- Whether you’re preapproved or not, applying for multiple credit cards can potentially lead to a dip in your credit score due to the hard credit checks that occur during the application process.
- Keeping track of multiple credit card accounts may be more difficult to manage, potentially resulting in missed or late payments.
- Having multiple credit cards could make it more tempting to overspend.
It's important to consider your ability to manage multiple credit cards responsibly before applying, and consider doing so gradually if you want to spread out the credit score impact of hard inquiries.
Now, all of that said, there are also some potential benefits to opening one or more credit card accounts:
- When used responsibly, credit cards can be a useful tool to potentially help you track and manage your spending, earn rewards for everyday purchases and potentially improve your credit score and credit history.
- Multiple credit cards might help improve your credit score by increasing your overall credit limit and lowering your credit utilization ratio. Credit utilization, or the amount of your available credit that you're using against your total available credit, is a major factor in credit score calculations.
Applying for credit cards for which you’ve already been preapproved could limit the possibility of being rejected, as preapproval indicates that you meet the lender’s preliminary requirements. While not a guarantee, a preapproval can be a helpful first step in the application process. Preapproved cards may come with perks, such as welcome bonuses.
What to consider before applying for a preapproved credit card
Before applying for any credit card, including those for which you’ve been preapproved, it's important to understand the terms of the credit card offer, including the annual percentage rate (APR), annual fee and any penalties or charges. This information should be stated in the preapproval offer and can help you determine if the card is a good fit for you. You might also want to consider your financial situation and ability to manage the card responsibly. This includes considering your current income, expenses and existing debt.
Comparing different credit card offers can help you find the one that suits your needs and spending habits. Consider looking at factors such as the rewards program and cardmember benefits.
The bottom line
When dealing with multiple preapproved credit card offers, it's helpful to make informed decisions based on your financial situation and ability to manage credit. This includes understanding the terms of each offer, considering your ability to manage multiple credit cards and comparing different offers to find which fits your lifestyle.
Remember that while having multiple credit card accounts can potentially improve your credit score, they also require careful management to avoid overspending and debt. It's important to use credit cards as a tool for building credit responsibly.
