Steven Truong [dot] Com

Pre-Approved VS Approved

I head out for my flight tomorrow but thought I’d make one quick post as it really warrants one. It has come to my attention that there is an alarmingly large number of people out there that do not know the difference between pre-approved versus approved (and pre-qualified). How anyone does not know this is beyond me as I’ve always known the difference (I can’t honestly see how people can mistake this but I guess people will be people).

First off, pre-approved does NOT mean you are approved. Most of the time this becomes a serious issue when someone gets a bunch of letters in the mail for credit card offers saying they are “pre-approved” and the person receiving the spam thinks they are approved for the credit card with the promise of 0% APR and $10,000 credit limit (this is purely an example as rates and dollars may vary for your experience). This doesn’t NOT mean you are approved for the card. It just means they’re trying to scam you into applying for it. Assuming you have the best credit available, it is possible that you might get the offer described in the letter (in this example, the 0%  APR and $10,000 credit limit) however results may vary even then. Assuming you have less than appealing credit or altogether bad credit, they may reject you or give you the card with horrible rates and a low credit limit. Worst case scenario is someone who applies to a bunch of these cards, get rejected because they have bad credit or some other reason causing them to be denied, and then rack up even worse credit because of all the inquiries they’re putting on their credit report (you lose points for applying for credit too often; while it’s not a lot, it certainly can add up if you don’t know what you are doing).

Second, approved means you’re approved and often times the only way you’ll be approved for something is if you applied for it already (credit card, car loan, mortgage, etc). If you didn’t apply for it and have them get back to you with an answer, you’re probably not approved.  Lastly, pre-qualified or pre-qualification is actually one step before the pre-approval. The only example I can think of is when you apply for a mortgage loan. Pre-qualified is that base on what you tell your loan officer or banker, it sounds like you qualify for the loan so they put you down as pre-qualified. Next step is where they check your credit scores, actual income, etc… to determine if you’re pre-approved. Once they know you are, you apply for the actual loan and if everything goes well, they may come back and tell you that you’re approved.