Prescreen Vs Prequalify: What's the Difference?

Though the two terms may sound similar, the difference between a prescreen and prequalification is significant when it comes to soft pulls. Why? Primarily because one requires consent, and the other does not.  

What is Prescreen?  

Prescreen is typically a "behind the scenes" process that screens consumers for an offer of credit without their knowledge. But an offer is all it is. It is up to you as the consumer to decide to accept it. 

The prescreen process typically starts with a request to a Credit Reporting Agency like Experian, TransUnion, or Equifax to create a target list of consumers based on specified credit criteria which qualify for an offer of credit. These credit criteria are used to filter or screen if you will, consumers who meet the desired credit criteria. Then finally, the Credit Reporting Agency provides that list of screened consumers to the authorized subscriber who originally requested and paid for the information.    

So why is this list useful?   

Have you received an email or direct mail piece that read, "You have been pre-approved for a new credit card"? The answer is most likely yes. It is because you were a match to a set of criteria requested by a business that is an authorized credit bureau subscriber.  

By only sending the offer to those individuals who meet the guidelines set by the business making the request, the chances of qualified candidates taking advantage of the proposed offer increases dramatically. Consider direct mail campaigns. These prescreen lists allow businesses to eliminate unqualified prospects, reduce consumers that have red flags, and ultimately targeting the best prospects.  

The intended benefit for you the consumer is that a prescreened offer makes it easy for businesses to keep you informed on offers available and suited to you. 

It is important to note that this is a regulated process. You, as the consumer, are also protected through the Fair Credit Reporting Act (FCRA).    

What is Prequalification?  

Many consumers are still learning about prequalifications. Unlike the prescreening process, the prequalification process differs in one significant way. Why? Because a prequalification request requires you, the consumer, to initiate the soft inquiry at a point of contact (consent-based). That in itself makes a prequalification process different from a prescreening process as it requires the consumer to request or authorize the inquiry, and it also typically happens at the point of contact via online or paper application and not behind the scenes.  

A typical scenario would be the decision to pursue a home improvement loan or finance a vehicle purchase. You, as the consumer, would reach out to a business and request to be prequalified. The lender or business can run a soft inquiry in real-time and present you with options for different credit products. All of this can be done without any potential adverse effect on your credit score because it's a soft pull.  

Furthermore, the prequalification process makes it possible for lenders and consumers to have a meaningful discussion about credit products that is a good fit for them. 

Below is a comprehensive look and the difference between a Prequalification and a Prescreen:   

Prequalification:  

• The consumer initiates the prequalification process by submitting a "written" consumer consent prequalification application (this can be done electronically or via phone if captured properly) 
• The subscriber generally receives a full-file credit report and credit score  
• Subscriber typically does not provide any specific credit data or credit score to the consumer, therefore, is not required to deliver or mail a Risk Based Pricing Notice  
• Subscriber returns a prequalified or not-prequalified response to the consumer  
• Subscriber is under no obligation to conduct business with consumer  
• Minimum required age = 18  

Prescreen:  

• Prescreen process is initiated by the subscriber via mail campaign, in-house, online, or phone campaign  
• The subscriber provides the consumer with an approved lender based credit offer  
• "Pre-approved firm offer of credit" must accompany pre-approval offer if the applicant meets pre-determined criteria  
• The subscriber generally receives a report summary with a score or score range as opposed to a full credit report 
• Firm offer of credit must be provided to the consumer, most often in person or by first-class mail 
• Consumers may opt-out of prescreened offers of credit 
• Minimum required age = 21