Denied credit? Your adverse action notice and free report

When a lender, landlord, insurer or employer turns you down because of something in your credit report, federal law requires them to tell you. That notice also opens the door to a free copy of the report they used.

What an adverse action notice is

Under the Fair Credit Reporting Act, anyone who takes adverse action against you based in whole or in part on a consumer report must notify you. The notice can be given orally, in writing or electronically.

Adverse action isn’t only a flat denial of credit. The FTC says you can get an adverse action notice for credit, employment, insurance or housing decisions based on your report. For rentals, the Consumer Financial Protection Bureau (CFPB) says adverse action can also include requiring a co-signer, or requiring a larger deposit or higher rent than other applicants pay.

The CFPB also explains that if a lender rejects your credit application, the Equal Credit Opportunity Act or the Fair Credit Reporting Act requires it to send you an adverse action notice. That notice must give the specific reasons for the denial, or tell you that you can ask for the reasons within 60 days.

What the notice must include

When the decision relied on your credit report, federal law and the CFPB say the notice must give you:

• The credit score used. The numerical credit score the company relied on, plus the key factors that affected it.
• Who supplied the report. The name, address and phone number of the consumer reporting company. If it’s a company that keeps files nationwide, this includes a toll-free number.
• A statement about the decision. The notice must say the consumer reporting company didn’t make the decision and can’t tell you the specific reasons for it.
• Your right to a free report. Notice that you can get a free copy of your report from that company, and the 60-day period to ask for it.
• Your right to dispute. Notice that you can dispute the accuracy or completeness of information in your report with that company.

When the information didn’t come from a credit bureau

Sometimes a lender denies credit for personal, family or household purposes, or makes it more expensive, because of information from a third party that isn’t a consumer reporting company. In that case, federal law says you can make a written request within 60 days after learning of the decision, and the lender must tell you the nature of that information.

Getting your free report

Federal law says a consumer reporting company must give you a free copy of your file if you ask within 60 days after receiving an adverse action notice. This is in addition to the free reports you can get at AnnualCreditReport.com. To use it, the FTC says to contact the bureau directly. Bureau contact information is listed at IdentityTheft.gov/CreditBureauContacts, and the notice itself should name the company and its contact details.

This applies to specialty reports too. If a landlord denied you based on a tenant screening report, the CFPB says you can ask the landlord for a copy or contact the screening company directly. For more on these reports, see the post on specialty consumer reports.

What to do next

The CFPB suggests these steps after a denial based on your credit report:

1. Review the reasons. Read the notice and find out what led to the decision.
2. Dispute inaccurate information. If your free report shows information that’s wrong, you can dispute with the credit reporting company and with the company that supplied the information. The credit reporting company must investigate and correct any errors it finds. The FTC says a bureau generally has 30 days to investigate.
3. Consider a statement of dispute. If you still believe information is wrong after the investigation, you can have a statement disputing it included in your report.
4. Build credit if your file is thin. If the denial was because you don’t have enough credit history, the CFPB points to its credit-building resources.

If you think something else went wrong

The CFPB says lenders can’t discriminate based on race, color, religion, national origin, sex, marital status, age (with some exceptions), or because you receive public assistance income. They also can’t discriminate against you for exercising your credit reporting rights in good faith, such as disputing information.

If you have a problem with a credit report or a tenant screening report, the CFPB says you can submit a complaint online or call (855) 411-2372. Whether you have other legal options depends on your situation, and states can have their own laws, so you may want to check with your state attorney general. For an overview, see your credit rights.

The short version

• If you’re turned down based on your credit report, the company must send you an adverse action notice.
• The notice must include the credit score used, the reporting company’s contact details, and your rights to a free report and to dispute.
• Ask the reporting company for your free report within 60 days of receiving the notice.
• Check the report for errors and dispute anything inaccurate with the bureau and the company that supplied it.
• If you think you were treated unfairly, you can submit a complaint to the CFPB.

Sources

• CFPB: What can I do if my credit application was denied because of my credit report?
• 15 U.S. Code § 1681m: Requirements on users of consumer reports
• 15 U.S. Code § 1681j: Charges for certain disclosures
• FTC: Free Credit Reports
• CFPB: What should I do if my rental application is denied because of a tenant screening report?

General information, not legal or financial advice. Laws and government guidance change, so check the sources above for the latest.