prequalification

Prequalification is the process of establishing, before a formal application, whether an individual or organization meets basic eligibility criteria for a financial product, program, or opportunity. It is used to gauge interest, plan resources, and identify if further steps are warranted. The outcome is usually non-binding and based on self-reported information or informal checks rather than verified data.

In lending, prequalification is common for mortgages and auto loans. Borrowers provide information about income, assets, and debts. Lenders may perform a soft credit pull and assess rough affordability to estimate a potential loan amount. Because full verification and a hard credit check are not always performed, the result is not a guarantee. A separate preapproval or formal application involves verification of income, assets, and credit, and typically yields a conditional commitment.

In procurement and contracting, prequalification—often via a prequalification questionnaire (PQQ)—screens prospective bidders to determine eligibility to bid. Criteria include financial stability, technical capability, relevant experience, safety records, licenses or certifications, and references. This step helps buyers reduce risk and streamline the bidding process by ensuring only qualified suppliers proceed to tender.

In other contexts, such as education, insurance, or employment, prequalification may refer to an initial screening that determines whether an applicant meets basic program prerequisites or coverage criteria before further evaluation or enrollment.

Process and validity: typical requirements include standardized forms and supporting documents. The review produces a prequalification decision, which may be valid for a defined period and subject to re-evaluation if circumstances change.

Prequalification differs from preapproval and formal qualification in that it is usually preliminary, non-binding, and not based on fully verified data.