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Got a 'preapproved' credit card offer? Sorry, you may not get it

Pre-approval isn't a binding contract or guarantee; they can still reject you

By

Opening Credits
Columnist Erica Sandberg
Erica Sandberg is a prominent personal finance authority and author of "Expecting Money: The Essential Financial Plan for New and Growing Families." She writes "Opening Credits," a weekly reader Q&A column about issues for people who are new to credit, for CreditCards.com.

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Question for the CreditCards.com expert

Dear Opening Credits,
I have been applying for credit cards -- preapproved ones -- but have been denied three times. I do not have a credit history as I have been using my husband's card as an authorized user. Now, since I want to apply for my own card and make my own credit score, the credit card companies deny me, though they are the ones who send the preapproved offer forms to me to apply in my name. I am confused and frustrated and wanted to know how to go about applying for a card in my name. Thank you. -- JT

Answer for the CreditCards.com expert

Dear JT,
Put down those preapproved letters this minute!

I understand that you would like to have a credit card of your very own (and you shall have one), but completing and submitting random "preapproved" applications is probably not the best method. In fact, it could even be harming your chance of getting the account that is best for you.

You'd think that when the words "preapproved" or "prequalified" are stamped on the envelope or enclosed letter that a credit card with your name on it is just waiting for you to claim it. Not so. These offers are simply promotional mailings.

It works this way: After some market research, the bank discovers that you fit the general requirements for a particular type of credit account they are offering.  It's a sensible cost-cutting technique for issuers. By narrowing down their potential customer base to those who might be right for the card, they avoid wasting money sending letters to people who definitely do not fit their profile.

In the event you fit what it is looking for, the credit issuer will send you the "preapproved" letter inviting you to apply. When you do, they'll analyze your financial circumstances and credit history in detail. Assuming you are really are the kind of cardholder they want, you will be approved and the card is yours. However, if it turns out you aren't a good match, you'll be denied, and the inquiry will go on your credit report. Too many of these inquiries within a short period of time will lower your credit score, making you potentially less attractive to other creditors.

So, what you need to do now is pull copies of your credit report. Why? As an authorized user on your husband's account, you actually do have a credit history and you need to know what it looks like. The report will provide detailed information about the way the two of you have been borrowing. If you aren't the one paying the bills, you may not be aware of how much debt your husband may be carrying from month to month, or if he's getting those payments in on time.

You may find that he's been doing great, and there's no debt and a perfect payment pattern. If so, terrific. But if not, I suggest you take one of two actions immediately:

Option No. 1: Work together to create a better credit history. Using credit cards responsibly isn't complicated, but it does take dedication. From this moment forward, pay on time and make every conceivable effort to pay the balance down.

or 

Option No. 2: Remove yourself from the account. You don't need to get your husband's permission or for the balance to be at zero -- just call and tell the issuer you don't want to be an authorized user anymore. This way you can put an instant stop to future problems.

It sounds like you've been doing some hot and heavy card shopping, so I'd like you to back off for a month or two and let your report recover a bit. In the meantime, check out all the different credit account offers that are available. Look at the terms and see if you fit their criteria for acceptance. You may want to focus on secured cards. Since they are guaranteed by a cash deposit, they are pretty easy to get. Also check out CreditCards.com's CardMatch program. By entering your information into the system, you'll get a list of credit cards for which you are likely qualified  -- without having an unnecessary inquiry mar your file.

See related: Key things you must know about credit reports and scores, How being an authorized user can hurt your credit score

Erica Sandberg is a nationally renowned personal finance authority. She’s host of several financial web shows, and a frequent guest for media outlets such as Fox, Forbes, Nightly Business Report and NPR. Erica previously was affiliated with Consumer Credit Counseling Service and was KRON-TV’s on-air credit expert. Her book, "Expecting Money: The Essential Financial Plan for New and Growing Families," was published in 2008 by Kaplan Press.

Send your question to Erica.

Published: September 15, 2010


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