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Denied Because Of Your Credit? Better Take A (Free) Peek At Your Credit Report!

You applied for new credit – a car, credit card, mortgage, or other loan. Maybe someone took at look at your credit report and took some action based on it. You want to see what they see – and you can.

There are few things as frustrating as being turned down for something – a loan, a job, whatever – after someone looks at your report. It’s as if they said, “Gee, we really liked you until we saw this … thing. Now, not so much.”

They’ve got a secret, and you’re dying to know what it is. Mostly because you’d like to set the record straight if the secret is wrong.

Thankfully, you’ve got a shot at learning truth.

In general, you’re entitled to a free report from a credit reporting agency after a someone takes a action against you based on a consumer report. In addition, you’re automatically provided with your credit score whenever a user of your report is required to send what’s called an adverse action or risk-based pricing notice.

What Is Adverse Action?

An adverse action is any action by a user of credit reports that is unfavorable to your interests. That includes denial of credit, changing your insurance rates due to your credit score, or making a credit-based employment decision.

When an adverse action is taken that is based solely or partly on information in a consumer report, the Fair Credit Reporting Act requires the potential creditor, employer or company to provide you with a notice.

For example, the following actions constitute an adverse action:

  • if an employer decides to not hire you based on information in a report
  • whenever consumer credit is denied at least in part due to information in a report
  • if a landlord decided to not rent to you based in part on a report

The Adverse Action Letter

The notice, also called an “adverse action letter,” must include the following:

  • the name, address and telephone number of the credit reporting agency that supplied the consumer report, including a toll-free telephone number for credit reporting agencies that maintain files nationwide;
  • a statement that the credit reporting agency that supplied the report did not make the decision to take the action and cannot give the specific reasons for it; and
  • a notice of the individual’s right to dispute the accuracy or completeness of any information the credit reporting agency furnished, and the consumer’s right to a free report from the CRA upon request within 60 days.

This notice is required even if information in the consumer report was not the main reason for the action. In fact, even if the information in the report plays only a small part in the overall decision, you still must be notified.

Why The Adverse Action Letter Is Important

This letter is of critical importance because lots of credit reports contain errors. If your credit report isn’t correct, there’s a good chance that a decision was made based on information that shouldn’t be there. With the disclosure, you know where to begin the hunt.

Once you’ve ferreted out the problems, you can begin the process of correcting the errors.

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By |August 14th, 2012|

About the Author:

I've been a consumer protection lawyer since 1995, working to help people end their bill problems. I'm a faculty member at the Student Loan Law Workshop, a nationally recognized speaker, and a long-time member of both the National Association of Consumer Bankruptcy Attorneys and National Association of Consumer Advocates.
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