# What is pre-approval for credit cards and loans?

Pre-approval for a credit card or loan puts borrowers one step closer to securing new credit they can use to make future purchases. It’s important to understand that not all pre-approvals are the same, and none guarantee credit will be extended. Learn what pre-approval means, how it works, common steps needed to get pre-approval, and ways to make pre-approval more likely.

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## What pre-approval means for credit cards and loans

Pre-approval means a lender such as a credit card company or a bank has done some initial homework on a borrower’s financial history. After this review, they’ve concluded the borrower is likely a good candidate for new credit. Lenders reach this decision in a few ways. They have studied the borrower’s credit report, which indicates reliability, timely payments and good credit habits. The borrower likely has a good to strong credit score.

Having pre-approval in writing from a lender benefits borrowers in a few ways. It can reduce the hassle, paperwork, and time needed to get a new credit card or loan. Pre-approval does this because it signals to any people involved in a financial transaction that the borrower is a good fit for a loan.

## How pre-approval works

The process of pre-approval involves a thorough review of the borrower’s financials. Often, lenders have trained financial professionals who review a borrower’s credit history, income statements, and tax returns. Not every pre-approval is this thorough. Some lenders require less information than others. Remember, pre-approval isn’t a guarantee that credit will be given.

## How pre-approval works for different loan types

### With credit cards
In some cases, borrowers might get a mailer, a push notification to their phone, or an email stating they are pre-approved for a credit card.

### With car loans
Many car buyers first visit their bank to seek pre-approval for an auto loan.

### With mortgages
If borrowers are looking for a home, they will often get pre-approval quotes from several lenders.

## How to make pre-approval more likely

Several activities can help borrowers increase their chances of successful pre-approval.

### Studying credit reports and scores
Get familiar with the free annual credit report available to every borrower.

### Collecting financial paperwork
Gather at least the most recent two years of signed tax returns.

### Meeting with potential lenders
A phone call, videoconference or in-person meeting between a borrower and a prospective lender can be beneficial.

## Does pre-approval guarantee the borrower will get a loan?

Pre-approval never guarantees the borrower will get a loan. Instead, pre-approval gives the borrower greater confidence they can secure a loan at some level.

## How does pre-approval work for people with bad credit?

Low credit scores, bankruptcies, or other issues can hurt credit and limit pre-approval opportunities.

## What's the difference between pre-approval and pre-qualification?

Pre-qualification is less rigorous and based on fewer data points. Pre-approval generally requires more paperwork.

## Does pre-qualification or pre-approval require a credit check?

Loan pre-qualification typically does not involve a hard credit check. Loan pre-approval usually requires a more detailed assessment which may involve a hard credit check.

## What strategies can boost income for pre-approval?

Sometimes, borrowers are unable to get pre-approval for a loan because their income is too low.

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