(1) A letter of commitment from a lender stating how much a borrower can borrow. More valuable than a prequalification, it requires a credit report and income verification and usually lenders charge for this service.
(2) A process used by credit card issuers to offer new cards to potential customers. Also known as prescreening, preapproval uses credit bureau records to select consumers who meet certain criteria (such as people with credit socres of 700 or more). Under the federal Fair Credit Reporting Act, anyone who receives an unsolicited credit card offer generated in this manner must be given firm offers of credit. Letters received with these offers state: “You have been preapproved for a credit card.” The Credit CARD Act of 2009 bans prescreened credit card offers to anyone under age 21.