Adverse Action Notice: What Your Loan Denial Letter Must Tell You and How to Read It
When a lender turns down your loan application, federal law requires it to tell you why, or tell you how to find out. That letter is called an adverse action notice. It is the most specific, free feedback you will get on what is holding your application back, and it often comes with a free credit report. This guide shows what the notice must contain, how to read the reasons, and what to do with each one. It is part of our credit scores hub.
Key takeaways
- Under Regulation B, a lender must notify you of action on a completed application within 30 days.
- The notice must give specific reasons, or tell you that you can get them if you ask within 60 days. "Internal standards" or "failed to achieve a qualifying score" are not sufficient reasons.
- If the denial was based on your credit report, the lender must give you the score it used, the key factors behind it, the name of the credit reporting company, and your right to a free report within 60 days.
- Each reason maps to a fix. Read the notice before you apply anywhere else.
What is an adverse action notice?
It is the written notice a creditor sends when it denies your application, or takes certain other negative actions on your credit. The CFPB explains that under the Equal Credit Opportunity Act (ECOA) or the Fair Credit Reporting Act (FCRA), a lender that rejects your application must send "an adverse action notice telling you the specific reasons your application was rejected or telling you that you have the right to learn the reasons if you ask within 60 days."
When must a lender send it?
Regulation B (12 CFR 1002.9) sets the clock. A creditor must notify you of action taken within:
- 30 days after receiving a completed application, whether it approves, counteroffers or takes adverse action
- 30 days after taking adverse action on an incomplete application (unless it sends a notice of incompleteness instead)
- 30 days after taking adverse action on an existing account
- 90 days after a counteroffer, if you do not expressly accept or use the credit offered
What must the notice include?
Regulation B says a notice of adverse action "shall be in writing" and contain the action taken, the creditor's name and address, a statement of the ECOA anti-discrimination provision, the name and address of the federal agency that oversees the creditor, and either the specific reasons or a disclosure of your right to them.
If the lender used your credit report, the FCRA adds more. Section 1681m requires the lender to disclose "a numerical credit score" it used, plus related details, and to tell you about your right to a free copy of your report, including "an indication of the 60-day period" for getting it. The CFPB summarizes what the lender must provide:
| Element | Required by | What it gives you |
|---|---|---|
| Statement of specific reasons (or how to get them within 60 days) | Regulation B, 12 CFR 1002.9 | The principal reasons you were declined |
| Credit score used | FCRA, 15 U.S.C. 1681m | The number the lender saw |
| Key factors that hurt the score | FCRA, 15 U.S.C. 1681g(f) via 1681m | Up to 4 factors, plus inquiries if they were a factor |
| Credit reporting company's name, address and phone | FCRA, per the CFPB | Where to get the report the lender used |
| Right to a free report within 60 days | FCRA, per the CFPB | A no-cost copy of that report |
| Right to dispute inaccurate information | FCRA, per the CFPB | The path to correct errors |
On the key factors: section 1681g(f) limits them to a total that "shall not exceed 4," but if the number of inquiries was one of the factors, it must be included "without regard to the numerical limitation."
How do you read the reasons on a denial letter?
Regulation B says the reasons "must be specific and indicate the principal reason(s) for the adverse action," and that statements that the decision was based on the creditor's "internal standards or policies" or that you "failed to achieve a qualifying score" are "insufficient."
Many lenders use wording close to the sample form in Regulation B's Appendix C. Here are the reasons from that form most often relevant to personal loans, and what each one points you toward.
| Reason on the notice (Appendix C wording) | What it usually means | What to do |
|---|---|---|
| Excessive obligations in relation to income | Your existing debt payments are high compared with your income | Check your ratio with the DTI calculator; pay down debt or apply for less |
| Income insufficient for amount of credit requested | The payment on the amount you asked for is too large for your income | Request a smaller amount or a longer term |
| Unable to verify income; Unable to verify employment (two separate reasons on the form) | Documents did not match or could not be confirmed | Gather pay stubs, tax returns or bank statements and reapply with them |
| Delinquent past or present credit obligations with others | Late payments, charge-offs or collections on your report | Check accuracy; see what a charge-off is |
| Collection action or judgment | A collection or court judgment is on your report | Verify it is yours and accurate; dispute if not |
| Number of recent inquiries on credit bureau report | Several recent applications | Stop applying; see soft vs hard credit pulls |
| Limited credit experience / No credit file | Thin or missing credit history | Build a record first, for example with a credit builder loan |
| Bankruptcy | A bankruptcy on your report | See rebuilding credit after Chapter 7 |
| Credit application incomplete | Something was missing from the application | Ask what was missing and resubmit |
Work on the key factors in the order listed. When the notice lists your score and up to four key factors, those factors are the scoring model's own ranking of what pulled your score down.
What should you do after you get an adverse action notice?
- Request your free report from the bureau named in the notice. The CFPB says you have a right to it, and "to get the free report you must request it within 60 days after you receive the notice."
- Compare the report with the reasons. If a reason rests on something inaccurate, dispute it with the credit reporting company and the furnisher. The CFPB says the credit reporting company "is required to conduct an investigation and correct any errors it finds."
- If no reasons were given, write to the contact named on the notice within 60 days. Regulation B gives the creditor 30 days to provide the statement of reasons.
- Fix the top reason before reapplying. Another application right away adds another hard inquiry without changing the outcome. The 60-day plan to raise your credit score before a loan covers the most common fixes.
For a full checklist after a denial, see what to do when you are denied a personal loan. If your score is good and you were still declined, the reasons are usually about income, debt or verification; why good credit can still get a personal loan denied goes through those cases.
What if you think the denial was discriminatory?
The CFPB notes it is illegal for a creditor to discriminate in any credit transaction because of race, color, religion, national origin, sex, marital status, age (if you can legally contract), receipt of public assistance income, or exercising in good faith a right under the Consumer Credit Protection Act. The notice itself names the federal agency that oversees the lender, and you can submit a complaint to the CFPB.
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Who this is for
You applied for a personal loan or other credit, were declined or offered worse terms, and want to understand the letter you received.
What to do next
- Find the notice and note the date you received it; your 60-day windows start there.
- Request the free report from the bureau named in it.
- Match each reason to a fix from the table above.
- When the top reason is fixed, prequalify with soft inquiries before applying again.
Common questions
How long does a lender have to send an adverse action notice?
Generally 30 days after receiving your completed application, under 12 CFR 1002.9. Other deadlines apply to incomplete applications, existing accounts and counteroffers.
Can a lender just say I did not meet its standards?
No. Regulation B says statements that the decision was based on internal standards or policies, or that you failed to achieve a qualifying score, are insufficient. The reasons must be specific.
Do I get a free credit report after a loan denial?
Yes, if the denial was based on a credit report. You are entitled to a free report from the credit reporting company named in the notice if you request it within 60 days, per the CFPB.
What are key factors on an adverse action notice?
They are the factors that most hurt the credit score the lender used. Federal law caps them at four, but if the number of inquiries was a factor it must be listed in addition.
What if the reasons on my notice are wrong?
If they rest on inaccurate credit report information, dispute it with the credit reporting company and the company that provided the data. If you believe the decision was discriminatory, you can submit a complaint to the CFPB.
How we researched this
We read 12 CFR 1002.9 and Appendix C on eCFR, 15 U.S.C. 1681m and 1681g, and three CFPB consumer pages on October 1, 2026, and quoted the regulation and statute directly.
Related: Soft vs hard credit pull · Do multiple personal loan inquiries count as one? · What is a charge-off? · Next step: personal loans by credit score
Sources
- eCFR, "12 CFR 1002.9 - Notifications," accessed October 1, 2026.
- eCFR, 12 CFR Part 1002, Appendix C, "Sample Notification Forms," accessed October 1, 2026.
- Legal Information Institute, "15 U.S. Code § 1681m - Requirements on users of consumer reports," accessed October 1, 2026.
- Legal Information Institute, "15 U.S. Code § 1681g - Disclosures to consumers," accessed October 1, 2026.
- Consumer Financial Protection Bureau, "What can I do if my credit application was denied because of my credit report?" accessed October 1, 2026.
- Consumer Financial Protection Bureau, "How do I get a free copy of my credit reports?" accessed October 1, 2026.
- Consumer Financial Protection Bureau, "How do I dispute an error on my credit report?" accessed October 1, 2026.
- eCFR (Consumer Financial Protection Bureau), “12 CFR 1002.9 - Notifications (Regulation B)”
- eCFR (Consumer Financial Protection Bureau), “Appendix C to Part 1002 - Sample Notification Forms”
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