My application for a loan was denied because of my credit report. What can I do?
First, find out what caused the lender to turn you down. If a lender or other institution denied your loan or took other adverse actions, like increasing your interest rate based on your credit report, the Fair Credit Reporting Act (FCRA) requires it to:
- Tell you it denied your application (or took other adverse actions);
- Provide you the numerical credit score it used in taking adverse action and the key factors that adversely affected your score;
- Give you the name, address, and telephone number of the credit reporting company that provided the report;
- Tell you about your right to get a free copy of your credit report from the credit reporting company that furnished it within 60 days of your adverse action notice; and
- Explain the process for fixing mistakes or adding missing items to your report.
If a lender rejects your loan application, the Equal Credit Opportunity Act (ECOA), requires it to tell you the specific reasons your application was rejected or tell you that you have the right to learn the reasons if you ask within 60 days.
Indefinite and vague reasons for denial are illegal. Acceptable reasons might include “too many recently opened accounts with balances” or “delinquent past or present credit obligations.” Unacceptable reasons include “you didn’t meet our minimum standards” or “you didn’t receive enough points on our credit scoring system.” Learn more about your rights under ECOA.
Credit discrimination is illegal. Under the Equal Credit Opportunity Act a creditor cannot discriminate in any credit transaction, including mortgages, against any applicant because of these factors:
- National origin
- Sex (gender)
- Marital status
- Age, unless the applicant is not legally able to enter into a contract
- Receipt of income from any public assistance program
- Exercising in good faith a right under the Consumer Credit Protection Act (such as disputing information in your credit report).
This means that a creditor may not use any of the above grounds as a reason to:
- Refuse you credit if you qualify for it
- Discourage you from applying for credit
- Provide you credit on terms that are different from the terms given to someone else who is similarly situated to you, such as having similar creditworthiness
- Close your existing account
If you believe that you were discriminated against on any of the above grounds, learn what protections you have against credit discrimination.
Tip: Don’t ignore mistakes in your credit record. If you are denied credit or not offered the best interest rate available because of inaccuracies in your credit report, be sure to dispute the inaccurate information. You may contact the credit reporting company and the creditor or other furnisher.