Waiting for a response to a credit card or loan application can be nerve wrecking. You might half-expect to be turned down if you know you don’t have a good credit history. On the bright side, if your fears are realized and you are turned down, lenders have to tell you why, even if your credit isn’t the blame.

ECOA Adverse Action Notice

Under the Equal Credit Opportunity Act, the lender must tell you the specific reason or reasons that your application was denied. You might be turned down, for example, if your income was not high enough or if your employment history is too short. The lender only has to send one letter per application, even if you applied with another applicant.

You might get an adverse action under the ECOA if any type of unfavorable action is taken against you, e.g. you’re approved but for a less than favorable interest rate.

FCRA Adverse Action Notice

The Fair Credit Reporting Act has a slightly more specific adverse action notification requirement. Lenders and creditors are required to send an adverse action notice if they pulled your credit report to make a decision on your application and if information in your credit report was the reason you were denied. Under the FCRA, you’re entitled to a free copy of the credit report used in that decision, but you must order it within 60 days.

Keep in mind that it was not the credit bureau that denied your application. The lender simply asked the credit bureau to reveal your credit history and the lender made their own conclusion.

Also, if you applied with another person, each of you will receive a separate FCRA adverse action notice explaining the reason or reasons the application was turned down.

Risk-Based Pricing Disclosure

Recently, the Federal government passed a law that requires lenders to send a free copy of a credit score used in an application decision if the credit score was the reason the application was denied.

Overcoming a Denial

If something on your credit report was the reason you were denied, make sure you order the free copy within the time frame. Otherwise, you may have to pay to review your credit report. Look over your credit report to be sure the information inside is accurate and dispute any errors you see.

Take the information in the adverse action notice to heart and take steps to make yourself a more attractive candidate. Depending on the reason for the lender’s decision, that could mean working toward a raise, paying off some debt, or improving your credit report. Spend some time fixing the problems that led you to be denied and then reapply again later. Hopefully, the next time will be a charm, but if not, wait for the denial letter to decide what you have to do next.