Preapproval and prequalification are both methods of lending assessment, but they vary depending on the creditors. Some may use these interchangeably, and others may not. Preapproval is a preliminary assessment of your creditworthiness. A creditor may offer you rates and terms for loans or credit card after determining you’ll likely get approved. Prequalification is a more formal assessment where you are given firm offers and interest rates.
What Is The Meaning Of Preapproved?
Getting preapproved for a loan or card may seem like an easy way to get approved, but it may not actually be the case. In some examples, “preapproval” and “prequalified” could mean the same thing. For example, if you’re preapproved for a credit card online, it may only mean that you’re qualified to apply for a card based on your credit score.
If you want to apply for this credit card offer, the creditor must offer you the same terms as in the mailing. However, the terms could vary depending on your credit score and other factors. You’ll find out your exact offer when you apply and agree to a hard inquiry.
Mortgage and car loan preapprovals are different from other types of preapproval. The process can be a bit more complicated, involving the submission of bank statements, tax returns, proof of income, and an agreement to a credit check.
What Is The Meaning Of Prequalified?
Prequalification is a process in the loan or card application process that lenders do to determine if you are likely to be eligible for a loan or card. Prequalification is determined by the consumer submitting a prequalification application for a loan or card.
When you apply for prequalification, lenders may ask you about your income, rent, and savings. Some will even do a “soft” credit inquiry. Soft inquiries have no impact on your credit scores.
Getting prequalified doesn’t guarantee an approval, but it’s a good idea if the credit agency is able to perform a “soft inquiry” (that is, without you even knowing about it). If you get denied at this stage, you’ll know you can move on and avoid the hard inquiry.
Do These Offers Affect Credit Score?
To get a better idea of how your credit scores will be impacted, you need to know the difference between soft and hard inquiries. For example, with a credit card, only a soft inquiry will be made if there’s a credit check. Auto loans and mortgages, on the other hand, are different and will typically result in a hard inquiry on your credit that could affect your credit scores.
