Have You Been Pre-Approved to Apply?

A friend of mine called this morning and when she told me she'd gotten a letter that she'd been "Preapproved to Apply" for a credit loan, we shared a great laugh about it. It used to be that you were "Preapproved" for credit…now you get to be preapproved to fill out the application.

So, what does preapproval mean?

Like everything else out there in consumer-land, it's all about marketing. Something about you fit the company's ideal demographics for their marketing campaign. It doesn't necessarily mean that you WILL be qualified for a credit line, but it means that certain criteria, i.e., your credit score, fell within the parameters of potential customers for ABC Credit Cards, Inc. (I made that up – please don't research ABC Credit Cards, Inc. It doesn't exist.)

When you're just starting out – getting that preapproval letter can make you feel all warm and fuzzy. It feels nice…like you're qualified to join a new club or something. And since you know you should establish credit in your name, it's so tempting to take all of them on. And once that pretty little piece of plastic is in your hands – it feels like free money! Until the bill comes… We'll wait while reality comes to a crash landing in your mailbox.

We're not saying it's a bad thing to apply for credit when you've been pre-approved… we're just suggesting that you be cautious. Because when you're 18 and you get that very grown-up-looking piece of mail – it's difficult to stay rational. If you're going to go for the credit line, be smart about it! Don't spend more than you can afford to pay off every month.