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Adverse Action Notices: What They Tell You

An adverse action notice names the credit bureau whose report was used, and the FTC says it lets you get another free report to check for errors.

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The Fair Credit Reporting Act requires notice to a consumer, and a business owner is a consumer here. The notice is required when adverse action is taken based on a consumer report. One part of it is especially useful. That part is the name of the credit bureau. That is what an adverse action notice is, and it is where your next steps begin.

What an adverse action notice is

An adverse action notice is a document. The FTC ties it to being denied credit, employment, insurance, or housing. It is sent when you are turned down based on a consumer report. Lenders use credit reports to help decide if they will loan you money. They also use them to set the interest rate, the CFPB says.

What the notice must contain

The Fair Credit Reporting Act sets the requirements. The FCRA requires the bureau's name, address, and phone number to be given to you, and the FTC says the notice gives them. Without that name, you would not know where to look.

Employment denials have one extra rule. The FCRA says an employer taking adverse action must give the consumer a summary. The summary covers the communication the action was based on.

The bureau does not decide on a loan

This is worth saying plainly. The FCRA's home loan notice says the bureau plays no part in the decision. The decision is about the loan application. The bureau supplied a file. The lender made the call. Credit reporting companies collect financial data about you. They also store it. Creditors send it in, the CFPB says. A creditor does not have to report to every company.

The free report the notice unlocks

Here is the practical payoff. The FTC says you can get another free report if you get an adverse action notice after being denied credit, employment, insurance, or housing. That one is on top of your regular free credit report.

What to do with the report

Read it. The FCRA's home loan notice tells consumers to review their credit information. This is to make sure it is accurate. The same notice says scores come from data about credit history and payment patterns. Scores can change over time as that data changes.

When the file contains an error

You can dispute errors yourself, for free, with the credit bureau and with the creditor. No paid service is required to start. The FTC and CFPB both describe this. The creditor's side is covered in how to dispute the credit report with the creditor.

What a dispute can and cannot do

A dispute is for wrong information. Disputing does not remove accurate, timely items. No one can promise that it will. No outcome and no timeline is guaranteed. You may want to know what happens after you dispute a credit report. The process has defined steps. But it does not promise a result.

Personal and business credit

Personal credit and business credit are covered side by side on another page. Read about the personal credit score for business owners. An adverse action notice points you to the bureau whose file was used. That file is yours to read. When it is wrong, it is yours to dispute.

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