What to Do If You Are Denied Credit

Here's what to do if a creditor denies your credit or loan application, or gives you credit with terms you don't like.

If you apply for, and the creditor denies, a loan or extension of credit, you can find out more about the reasons for the creditor's decision. You can also get a free credit report; review the report for problems that you can fix. Here’s what you can do if this happens to you.

(Learn more about fair lending and credit discrimination.)

Ask the Creditor for the Reasons for Its Decision

You should always ask the creditor what it based its decision on, the reasons for its decision, and how the terms it offered you compare with the terms it gave to other consumers. In many situations, the creditor is required to give you this information. See Your Rights to Notice Regarding Credit Decisions, for details.

Ask before you use the credit. If you accept credit on terms worse than those you requested, the creditor may not be required to give you any notice. So, if possible, before you accept the offer or use the credit, ask for a written statement explaining the reasons the creditor did not give you the requested credit terms. For example, if you receive a credit card with terms worse than those offered in an advertisement or worse than what you requested, send a letter and wait for an answer before you use the card or accept the terms. Even if you already accepted those terms, it’s still a good idea to send a written request to the creditor asking why you did not get the terms requested.

Ask for reasons when the creditor changes your existing credit terms. If the creditor reviewed your account on its own, based its decision in part on any credit report, and took an action adverse to you (such as reducing your credit limit or raising the interest), the creditor must also provide you notice about the credit reporting agency where it got the information and your rights to get a free report or dispute the information. If a creditor changes the terms of your credit account, even if you don’t get a notice about your rights, it doesn’t hurt to write to the creditor and ask if it relied on any credit reporting agency and to explain the specific reasons it changed your credit terms.

Get your credit report. Use the notice from the creditor to get a free copy of your credit report and look for a problem that caused the creditor to offer you the less favorable terms. (To find out what to look for, and what to do if you find a mistake or problem, see the articles in Cleaning Up Your Credit Report.)

Ask for an explanation. If you can’t see a problem and want to pursue the matter, ask the creditor to explain what items in your credit report caused you to receive the less favorable terms, how your credit report differs from customers who received significantly more favorable terms, and what those terms are.

If the Creditor Violated the Law

The Equal Credit Opportunity Act prohibits creditors from basing its credit decisions on various characteristics such as age, race, color, gender, marital status, and more. (To learn about the ECOA and prohibited credit discrimination, see Laws That Prohibit Credit Discrimination.) It also requires that the creditor provides notices in certain situations. (See Your Rights to Notice Regarding Credit Decisions, for details.)

If you are harmed by the creditor’s violation of the ECOA (whether due to discrimination or a notice violation), you can sue the creditor. If you are successful, the court may award regular damages, up to $10,000 in punitive damages, and attorneys’ fees. If the credit discrimination relates to housing, you can bring a lawsuit based on violations of the Fair Housing Act which also provides for damages and attorneys’ fees if you win. Likewise a successful lawsuit based on violations of the Fair Credit Reporting Act may also result in damages and attorneys’ fees. Because the defendant must pay your attorneys’ fees if you win these types of lawsuits, attorneys specializing in credit discrimination lawsuits may be willing to take your case, without charging you fees up front, if they think you have a good chance of winning.


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