“John, I applied for a credit card about 3 weeks ago. Today I received a letter from the credit card company telling me that my request for credit has been denied.
The letter also included by credit score, which was a 598. Why did I receive this letter?”
What you received was a letter formally referred to as a notice of adverse action. In plain English, that’s a declination letter.
The reason you got that letter isn’t necessarily because you were denied credit.
You received that letter because the Fair Credit Reporting Act (hereafter “FCRA”) requires lenders to send those letters to anyone who is denied credit based on their credit reports or credit scores.
That letter signifies a variety of things, some of which is good news and some of which is bad news.
The bad news, obviously, is that you weren’t able to get the credit card for which you applied. The good news is that letter contains a great deal of information that will be useful to you.
The declination letter must contain the following items;
Adverse Action letters will include a high level reason why your application was denied.
The reason can be as specific as “insufficient income” or “credit score too low” to as vague as “information on your credit report.”
Declination letters are form based, which means normally boxes are checked and specifics are generally lacking.
Point being, you won’t ever see a declination letter that reads, “We denied you because you have several late payments on your auto loan.”
The Credit Bureau
Adverse Action letters are required to include the company that provided your credit report information.
So, if the lender pulled your Experian credit report then the letter will include Experian’s contact information.
This is important because the fact that you were denied based on information in your credit report means you are entitled to a free copy of that report if you request it within 60 days of the date of the letter.
The Credit Score
In 2011, lenders that used your credit score as a basis for an adverse decision (like a denial of credit) were required to start giving the applicant the actual score they used.
So, in the scenario above the lender would have had to provide the 598 to the consumer.
In addition to the score, the letter has to provide the range of the score used (normally around 300-850) and key factors that adversely affected the score.
A Few Things You Should Know
There are a few things to keep in mind regarding these letters. First off, the adverse action notice is going to show up, whether you ask for it or not.
The auto-pilot nature of the credit score disclosure is nice because applicants who have just been denied credit, at least, know just how bad their credit is without having to go somewhere else and ask for it.
That’s not the case with your credit report.
If you want to leverage your right to get a free copy of your credit report then you have to contact the credit bureau and ask for it.
If you don’t ask for it, or you wait too long to ask for it…you either won’t get it or you’ll be charged for it.
Finally, that fact that you were denied credit does not go on your credit report and won’t ever go on your credit report.
In fact, the only record that you applied for credit is the credit “inquiry”, which is a record of name of the lender pulling your credit report and the date the report was pulled.
John Ulzheimer is the Credit Expert at CreditSesame.com, and a credit blogger at Mint.com, CreditCardInsider.com and the National Foundation for Credit Counseling. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO and Equifax, John is the only recognized credit expert who actually comes from the credit industry. The opinions expressed in his articles are his and not of Mint.com or Intuit. You can follow John on Twitter here.