Pre-Qualification Defined

What Is Pre-Qualification ?

The term pre-qualification refers to an estimate for credit rating given by a lender based on information provided by a borrower. Pre-qualifications are conditional and involve the lender reviewing a borrower ‘s creditworthiness before granting a pre-approval. Lenders generally use this as a selling tactic for creditors seeking to obtain newly customers, particularly for things like credit rating cards and mortgages .

Key Takeaways

  • A pre-qualification is an estimate for credit given by a lender based on information provided by a borrower.
  • Pre-qualifications are conditional and involve the lender reviewing a borrower’s creditworthiness before granting a pre-approval.
  • Lenders generally use pre-qualifications as a marketing tactic for creditors seeking to obtain new customers.
  • If a borrower decides to apply for a pre-approved deal, the creditor still needs to obtain a hard inquiry on their credit report.


What Is A Credit Reference?

How Pre-Qualifications Work

Pre-qualifications are popular selling tactics used by many creditors to entice modern and existing customers to apply for credit products such as loans, credit cards, and mortgages. In most cases, pre-qualifications are unasked offers for credit. This process gives these consumers some discriminatory access in a credit application .

Lenders use existing data provided by consumers. This may be from data provided in a former application or because the consumer is already a customer. Creditors besides have multiple relationships with credit agencies that allow them to target sealed types of borrowers and obtain soft recognition inquiries for pre-qualification. soft inquiries do n’t affect an individual ‘s accredit score. Creditors broadly target borrowers by their credit history. Relationships with citation agencies allow creditors to obtain lists of potential borrowers in their target score range and to pull delicate credit inquiries for determining pre-qualification offers .

likely borrowers may receive a call call or a letter in the mail offering a pre-qualification for a specific sum for a certain credit merchandise. If matter to, the consumer can contact the creditors to proceed with the application. This can help increase a borrower ‘s chances of acceptance .

If a borrower does n’t receive a pre-qualification offer, there are a few resources they can turn to for understanding if they may be pre-approved. many creditors offer a pre-qualification cock that allows a borrower to obtain a pre-approval with a soft inquiry that does not affect their credit score . is one source for obtaining these offers. Its credit equal tool provides free pre-qualifications from multiple accredit providers allowing a borrower to compare products across issuers. Credit monitoring sites like Credit Karma besides offer pre-qualifications based on consumers ‘ credit rating histories.

Creditors use soft inquiries to determine pre-qualifications, which means they do n’t affect a consumer ‘s credit report.

limited Considerations

Since pre-qualifications are conditional offers, they do n’t necessarily guarantee that a fiscal initiation will issue person that measure of credit or any credit at all. Pre-qualification offers are just estimates and market documents that can help a credit issuer obtain fresh customers. If a borrower decides to apply for a pre-approved distribute, the creditor still needs to obtain a intemperate inquiry on their citation report. This provides the lender with more comprehensive examination information on whether the customer actually qualifies and, if accepted, how much the creditor will lend .

Borrowers need to have a good sympathy of their citation score and accredit profile. numerous citation inquiries and rejections can have a meaning negative effect on a borrower ’ second citation score, decreasing their eligibility for obtaining credit rating in the future .


Understanding Pre-Qualification Vs. Pre-Approval

Pre-Qualification vs. Pre-Approval

Pre-qualification and pre-approval are unique to the credit rating industry. They can be a successful and profitable selling tactic that attracts customers through aim mail in the form of either letters or emails. While they may seem alike, there are certain differences between the two .

While a pre-qualification is normally the inaugural dance step in the credit commercialize summons, a pre-approval is the second gradation in the lend process. The former indicates creditworthiness, while the latter provides the borrower with a more definite answer. Lenders require consumers to fill out a credit application in holy order to get a pre-approval and may provide a certain credit rating limit after doing a review of the borrower ‘s fiscal history. In most cases, the lender provides consumers with a conditional commitment. thus if a borrower has a mortgage pre-approval in hand, they can begin shopping for a home that fits into that price range .

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