The adverse action notice
When a lender denies your credit application — or approves it on worse terms than you requested — they're required by the Equal Credit Opportunity Act (ECOA) and the FCRA to send you an adverse action notice. This isn't a courtesy; it's a legal requirement.
The notice must include:
- The name and contact information of the credit reporting agency that provided the report used in the decision
- Your right to a free copy of that report
- Your right to dispute inaccurate information
- The specific reasons for the adverse action (the lender must give you the primary reasons — usually a list of 2–4 score factors)
Hold onto this notice. It's your roadmap for what to look at.
Your 60-day window for a free report
Under the FCRA, you're entitled to a free copy of the specific credit report the lender used — beyond your regular annual entitlement — within 60 days of receiving the adverse action notice.
To get your free report, contact the credit reporting agency listed in the notice. The notice should include instructions. For the three major bureaus:
- Equifax: 1-800-685-1111 or equifax.com
- Experian: 1-888-397-3742 or experian.com
- TransUnion: 1-800-916-8800 or transunion.com
When you call or go online, reference the adverse action. They're required to provide the report free of charge within this window.
What to look for in the report
The reasons cited in your adverse action notice point you to specific areas of your report. Common adverse action reason codes and what they mean:
"Derogatory public record or collection filed" — Look for collections, charge-offs, judgments, or liens you may not be aware of or that may be inaccurate.
"Too many accounts with balances" — You have revolving balances open across many accounts. This is a utilization signal.
"Proportion of balances to credit limits is too high" — High utilization. Check each card's reported balance versus its limit.
"Account payment history is too new to rate" or "Length of credit history" — Your accounts are too young. This is a time issue, not an error.
"Too many inquiries in the last 12 months" — Check your inquiry section. Are all hard inquiries ones you authorized? An unrecognized inquiry could be an error or fraud indicator.
"Serious delinquency" — Look for charge-offs, settled accounts, collections. Identify which account is driving this factor.
Comparing the report to your expectations
Go through the report line by line. For each account:
- Is this account actually yours?
- Is the balance correct?
- Is the payment history accurate? (Look at the monthly grid — each month should show the correct status)
- Is the account status correct (open, closed, charged off, settled)?
- Is the date of first delinquency accurate?
Compare what you see to your own records. Any discrepancy is a potential dispute.
Filing disputes after an adverse action
If you find errors, file disputes with the bureau that provided the report. You can do this online, by mail, or by phone (though written disputes create a paper trail and are recommended).
The FCRA gives you the right to have inaccurate information corrected, and the bureau has 30 days to investigate.
Use the denial as a diagnostic tool
Being denied credit is frustrating, but the adverse action notice is genuinely useful. It tells you exactly which bureau's report was used, exactly which factors hurt your score most, and gives you a free look at the data behind the decision.
Many people find errors this way — errors they would have never caught without the prompt of a denial. Pull the free report within 60 days, work through the adverse action reasons, and dispute anything that shouldn't be there.