Consumers who are declined for credit are provided a disclosure often referred to as an Adverse Action notice. Although the format of the notice may vary from lender to lender, it should at a minimum include information about why or how you can obtain the reasons you were declined.
Under the Fair Credit Reporting Act and the Equal Credit Opportunity Act, an "adverse action" has occurred when a bank uses a credit report or credit score in a decision to:
- Deny credit to an applicant,
- Make an unfavorable change in credit terms for an applicant, or
- Make an unfavorable change in credit terms for a current borrower.
In general, this triggers a written notice from the lending institution informing you of the specific adverse action taken, the reasons why, your right to a free credit report, if requested within 60 days, and other information to improve your chances of getting the credit you seek in the future. Since 2011, when a credit score is used in taking an adverse action, the notice sent by the lender must include the credit score used in making the decision and other related information. See Figure 1 below for a sample Adverse Action notice.
Note: The reasons stated for your credit application disclosure will vary, based on what is in your credit report.
Thank you for your recent application for an XYZ Bank credit card. Your request for a credit card was carefully considered, and we regret that we are unable to approve your application at this time, for the following reasons:
- ____ is below our minimum requirement.
- ____ is insufficient to sustain payments on the amount of credit requested.
- ____ could not be verified.
- ____ is not of sufficient length to qualify.
- ____ could not be verified.
Your Credit History:
- ____ of making payments on time was not satisfactory.
- ____ could not be verified.
- ____ lacks a sufficient number of credit references.
- ____ lacks acceptable types of credit references.
- ____ reveals that current obligations are excessive in relation to income.
The consumer reporting agency contacted that provided information that influenced our decision in whole or in part was
ABC Credit Reporting
123 Main St.
The reporting agency played no part in our decision and is unable to supply specific reasons why we have denied credit to you. You have a right under the Fair Credit Reporting Act to know the information contained in your credit file at the consumer reporting agency. You also have a right to a free copy of your report from the reporting agency, if you request it no later than 60 days after you receive this notice. In addition, if you find that any information contained in the report you receive is inaccurate or incomplete, you have the right to dispute the matter with the reporting agency. Any questions regarding such information should be directed to the reporting agency listed above.
If you have any questions regarding this letter, you should contact us at
456 Main St.
We also obtained your credit score from this consumer reporting agency and used it in making our credit decision. Your credit score is a number that reflects the information in your credit report. Your credit score can change, depending on how the information in your credit report changes.
Your Credit Score: 647
Date: July 21, 2011
Scores range from a low of 336 to a high of 843
Note: The actual reasons stated for your credit score will vary, based on what is in your credit report. For an explanation of the meaning of some of the most common reasons, visit our FICO® Score Factors Guide
Key factors that adversely affected your credit score:
- 040 Derogatory public record or collection filed
- 020 Length of time since derogatory public record or collection is too short
- 014 Length of time accounts have been established
- 024 No recent revolving balances
- Inquiries impacted the credit score
If you have any questions regarding your credit score, you should contact ABC Credit Reporting Agency that provided the credit score at:
123 Main Street
Anytown, USA 99999
Call toll-free: 1-888-888-8888
Notice: The federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age (provided the applicant has the capacity to enter into a binding contract); because all or part of the applicant's income derives from any public assistance program; or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. The Federal agency that administers compliance with this law concerning this creditor is:
Another Town, USA
While the exact content of an Adverse Action notice may vary by lender, or by the event that triggered the notice, the document will likely contain the following:
- The name and address of the financial institution
- A statement that provides either:
- The specific reasons for the action taken; or
- A disclosure of your right to request a statement of the specific reasons for the action taken
- Your credit score plus
- The date the score was generated
- The range of scores for that particular scoring model
- The key factors that adversely affected your score (note that these key factors may be different from the four principal reason for taking adverse action listed above)
- An indication if the number of recent inquiries negatively impacted the score
- The name, address and phone number of the credit reporting agency that supplied the report used in evaluating your credit application
- Information on where you may obtain a free credit report within 60 days after receiving the notice
There is a wide range of reasons that could prompt an Adverse Action notice, many of which are based on your credit history such as:
- Failure to make payments on time
- The presence of a recent collection action or judgment
- Limited credit experience
- A number of recent credit inquiries
- A foreclosure or repossession
The FICO® Score Factors Guide provides more information about how to interpret the reasons you your FICO® Score was not better so you can understand how to improve your credit standing.
It's important to note that errors on your credit report may result in a less desirable credit decision from your lender, including a higher interest rate or being declined. Periodically checking your credit report from each of the nationwide credit reporting agencies will help you keep your credit history in shape and ensure you get the best results possible given your score.
ScoreInfo.org offers insights you need to manage your credit health including Tips for a Better FICO® Score, Credit Basics and FICO® Score Basics.