What Is an Adverse Action Notice? Meaning, Contents, and Next Steps
A credit denial letter may include a credit score, two reasons, and a reporting company you’ve never contacted. Each of those items serves a different purpose. The creditor explains its reason for the denial. The reporting company provides the file, which you can review for any errors.
That division matters when a notice raises more than one problem. Correcting a reported late payment will not resolve a separate issue with income verification. A useful response follows the reasons the creditor actually gave.
What the notice tells you about a credit decision
A loan refusal or a rejected request for a higher limit can trigger this notice. It can also follow certain account closures or limit cuts, even if you have not applied for new credit.
Regulation B implements ECOA (the Equal Credit Opportunity Act) and governs explanations for covered credit decisions. Report information brings FCRA (the Fair Credit Reporting Act) into play. Its report-related rights can apply even if other information also shaped the outcome.
Credit decisions based solely on income may require a Regulation B explanation, even if a credit report was not used. Disclosures associated with credit reports are for other purposes.
The parts of a credit notice and what they do
The creditor’s action and explanation
Find the creditor’s business name and mailing address on the notice. It must describe the outcome. It may give the main reasons there or explain how you can request them. If reasons are available on request, the notice must identify the responsible person or office and provide an address and phone number.
The ECOA statement describes prohibited grounds for credit discrimination. It must identify the creditor’s federal regulator and give that agency’s address. That contact matters if an explanation never arrives or you suspect unlawful treatment.
A denial reason should point to the actual issue that drove the decision. “Unable to verify income” is specific enough to discuss. A vague reference to lending policy, or merely saying you missed a score cutoff, is not an adequate explanation.
The report and any credit score used
Look in the notice for the reporting company whose information the creditor used. A mailing address and telephone number must be provided for that company. The notice must explain that the company supplied the information but did not decide the result and cannot give you the creditor’s explanation. It must also describe your right to obtain that report at no charge and challenge information you believe is wrong or missing.
The creditor must disclose a numerical credit score used in making the adverse decision, if it used one. The accompanying details must show the model’s range, the main factors that reduced the score, its creation date, and the provider of the score or underlying credit file.
Score factors are not a substitute for the reasons a decision was made. High credit-card balances may cause a score to decrease. It doesn’t explain why a decision was made based on income that was not verified. Read the reasons the decision was made, even if a score is shown on the page.
A sample notice with two separate problems
This example uses portions of selected notice details. It is for illustration only, and is not a complete legal form.
Action: Example Bank refused your loan application.
Main reasons: Delinquent Credit Obligations. Unable to verify income.
Report used: Example Reporting Company; address and telephone number included.
One factor affecting the credit score: High balances on revolving accounts.
The first reason may be payment history. Get a report for the named company and find the account entries for the late payments. The account section of a credit report usually shows the balance, account status, and payment history. Compare the disputed month to your statement and payment.
The second reason is related to the review of the application. Ask the bank what income information it was unable to verify. Missing documents, a mismatch, and income that does not meet the creditor’s requirements are different issues. You need to understand the bank’s reason before you determine what document to provide.
Score factors add context for the score but do not indicate which income record is missing or which payment was reported late. Even if the entry for the late payment is corrected, the income issue could still be present. Each of these issues requires its own follow-up.
Keep the notice deadlines separate
The deadlines below describe various events. Some pertain to the creditor’s notice. Others relate to a request you make. The rules regarding credit notices are found in Regulation B’s notification requirements. The free-report window is derived from the FCRA.
| Event | Time allowed | What starts the clock |
|---|---|---|
| The creditor notifies you of its decision on your completed application | 30 days | The creditor receives the completed application. |
| Notice of a qualifying unfavorable change to an account you already have | 30 days | The creditor takes the action. |
| You request specific reasons when the notice offers them on request | Ask within 60 days. The creditor must supply the reasons within 30 days after your request. | Your request window begins with the creditor’s notification. |
| Your request for a free report from the named reporting company | 60 days to make your request | Your receipt of the notice. |
For the reasons request, notification occurs when the creditor delivers or mails the notice. Keep both the notice and its envelope or delivery record. The free report window starts when the notice is received. Requesting either item as soon as possible prevents relying on the last possible day.
A counteroffer changes the notice rules for your original request. Expressly accepting the offer, or using the offered credit, means that refusal is not adverse action under Regulation B. If you do neither, the creditor generally must notify you about the refusal no later than 90 days after notifying you of the counteroffer. A combined notice that meets Regulation B can satisfy the notice duty without a second notice. The offer need not remain available for all 90 days.
The two 60-day request periods are not the deadlines to dispute errors on a credit report. The periods do not provide an appeal right. The requirements of a creditor’s reconsideration process may differ.
Ask for reasons that are missing or too vague
If the notice offers reasons on request, contact the office it identifies. A written request provides a record. You may wish to use the following example to make your request:
Regarding application [reference], your letter dated [date] indicates I may request the specific reasons for your decision. Please provide those reasons. Please send your response to [mailing address or accepted electronic contact].
If reasons have been given but remain unclear, ask for a clearer explanation about the specific item. For example: “Which income source could not be verified, and what document would address that problem?” This type of question requests an explanation. It doesn’t require the creditor to take any action to approve the application or change its lending standards.
If you receive the reasons orally, you can request a written record. Once the creditor receives that request in writing, it has 30 days to provide the confirmation.
Get the report named in the notice
Request the free report directly from the reporting company listed on the notice. Then, state that you received an adverse action notice. The CFPB’s description of report-based credit denials describes this right and the disclosures that accompany it.
Look at the company’s file to start, and only consider what is in a phone app report or score if it’s the same. There are specialized reporting companies that creditors may use instead of, or in addition to, a nationwide credit bureau. Ask the creditor which report you should check if there are several named.
Keep the dated report with the notice. Your current file may reflect a payment or correction made after the creditor’s review. If the records differ, ask which account and reporting date the creditor relied on. That helps separate a reporting error from a later update.
Follow up with the party responsible for the problem
A report entry is inaccurate or incomplete
Dispute an inaccurate or incomplete report entry by contacting the reporting company and the company that provided the information, or “furnisher.” Identify the account and explain the reasons for the dispute. Provide copies of proof if available, such as a copy of the statement where the payment was posted. Keep the original statements.
In the sample notice, the disputer should address the inaccurate late payment record. Merely stating that the bank should have approved the loan will not tell what’s wrong with the report.
The application information needs attention
Contact the creditor about an issue with income, identity, or documents in its own review. Ask about what was missing or inconsistent. Correct the issue in the application through the channel preferred by the creditor. Generally, credit bureaus cannot correct an income document if it is only in the lender’s possession.
The information is accurate, but the decision is unfavorable
See if the creditor offers a reconsideration and what it would take for them to review the decision. They may not be open to reconsidering the decision. Notices provide information and rights to you; they don’t guarantee approval after a correction. Don’t dispute accurate information just because it was an adverse factor in the decision.
Keep the notice, each request, supporting records, and responses together. If an explanation is required and doesn’t come, the federal agency named in the ECOA notice is a relevant complaint agency. If you suspect discrimination, you should document the incidents and dates. An attorney can help analyze the incidents and determine if there are time limitations to file a complaint.
Similar notices that need a different reading
A request for missing information: An incompleteness notice identifies what information the creditor needs and gives a reasonable time period to respond. If you do not respond within the period, the application will not be further considered. The creditor can deny the application that is incomplete. However, if it has enough information to deny for another reason, it must state that reason or explain how it can be obtained.
A higher-priced approval: A risk-based pricing notice may be provided when credit is granted under less favorable terms due to information in the report. It is in a different notice category. A score disclosure by itself will not indicate that credit was denied.
A job, rental, or insurance decision: FCRA notice rights may apply to report-based decisions in these settings. Before a final adverse employment decision based on a consumer report, an employer generally must give you the report and a summary of rights to review. The consumer credit-related deadlines above do not automatically apply.
Just receiving the notice won’t impact your score, but hard inquiries, account closures, and changes to your credit limit can all impact your score. Asking for your own report won’t hurt your score, so you don’t need to be concerned about that when you request your reports.