Most people believe that getting a loan or credit card approved is a long and difficult process. While it can be true in some cases, there’s another, easier way — pre-approved offers. Although it may not be available to all, you can benefit from it if you have a good credit score.
This article explains how your credit score plays a pivotal role in getting pre-approved loan and credit card offers, why these offers are so valuable, and what you can do to stay eligible for it.
What is a Credit Score and Why does it Matter?
Your credit score is a 3-digit number that lies between 300 and 900. It reflects your creditworthiness, based on how responsibly you’ve handled loans and credit cards in the past. The closer the score to 900, the better it is considered. A high score means you pose low risk for the lender, and thus, they are more likely to approve your loan or credit card applications.
A good credit score (typically, a CIBIL score of 750 and above) can provide you access to loans or cards without the usual hassles like long paperwork or delayed approvals. Lenders check your credit score to see if you qualify for their credit products. This soft enquiry has no impact on your score.
Read in Detail: What is a Credit Score?
Soft vs Hard Enquiry: What’s the Difference?
Soft Enquiry
When you check your credit score, it’s called a soft enquiry. As you are simply reviewing your credit health, it is only visible to you and doesn’t feature in your credit report, having no impact on your credit score at all.
Hard Enquiry
When a lender checks your score after you apply for a credit product, that’s considered a hard enquiry. This gets recorded in your report and may cause a slight impact on your score, especially if done multiple times in a short duration.
What Are Pre-approved Offers?
Pre-approved offers are loan or credit card deals extended to you by banks or NBFCs based on your existing credit score, income, and overall credit profile.
If you already meet a lender’s criteria, for example, a 750+ credit score, stable income, and job tenure, you might get an offer even without applying.
Benefits of Pre-approved Offers
Pre-approved offers can make life easier for you when you need credit quickly and without much hassles. Some of the benefits of these offers are mentioned below:
- Higher Chances of Disbursal
Since you already meet the bank’s criteria, there’s a high chance your loan or card will get approved instantly. - Lower Interest Rates
Lenders are often willing to offer preferential rates, which means a lower cost of credit when your creditworthiness is already established. - Minimal Documentation
As the lender already has most of your details, these offers usually come with less paperwork, making the entire process easier. - Faster Disbursal
Since checks are already done, the loan amount or card approval often comes through in just a few hours or days. - Extra Perks at the Time of Approval
The lender may also provide zero processing fees, reduced or no foreclosure charges, and better overall terms.
Why Borrowers with Only Good Credit Scores Get Pre-approved Offers
Lenders extend such offers only to those with a strong credit score, often borrowers with CIBIL score of 750 or more. This is because they want to reduce their risk and serve borrowers more likely to repay on time.
If your score is low, you may not be eligible for most pre-approved offers and may have to go through the regular application process and documentation. Apart from a lengthy approval process and detailed documentation, you may also have to adhere to stricter loan terms.
Also Read: How is a High Credit Score Beneficial for You
Do Pre-approved Offers Affect Credit Score?
Just viewing or receiving a pre-approved offer doesn’t impact your credit score. As you did not request an offer, no hard enquiry is initiated.
But once you accept the offer and apply for the loan or card, a hard enquiry will be initiated by the lender. This might reduce your score slightly, and that too only temporarily. If you follow a disciplined credit behaviour, your score would rise again.
What if Your Credit Score is Low?
As you may not be eligible for pre-approved offers when your credit score is low, you should first and foremost try to improve your credit score. If you’re working on improving your score, it may take some time depending on the severity of your credit profile. Once your score crosses the minimum eligibility threshold, lenders start offering you these pre-approved offers again.
It’s also possible that you once had such offers, but they are no longer available due to a drop in your score. In such cases, rebuild your credit profile and maintain a high score, and after some time, lenders might show you pre-approved offers again.
Suggested Read: Ways to improve Credit Score
Maintain Your Credit Score to Stay Eligible
Pre-approved offers depend mainly on your credit score. That’s why, it’s important to:
- Pay loan EMIs and credit card bills on time
- Keep your credit utilisation ratio low
- Avoid frequent loan applications
- Monitor your credit report regularly
A consistent credit behaviour will enable you to stay eligible for the best credit offers whenever needed.
Emergencies can occur any time, and staying prepared for them can always be beneficial. When you have a high credit score and, you get trapped in a financial crisis, you can get a pre-approved loan almost instantly and come out of the crisis without paying higher cost of credit and also get the credit approved on your terms.
To stay updated with your credit score, do check it on Paisabazaar. In case you have a good credit score, you can see numerous pre-approved offers on your dashboard. In case you have a low score and you want to improve it with the help of expert assistance, do subscribe to Paisabazaar’s Credit+ program and start rebuilding your credit score starting today.
