If Your Personal Loan Application Is Denied

The notice a lender owes you

Regulation B, the rule under the Equal Credit Opportunity Act, sets the clock. A lender has 30 days after it receives a completed application to tell you whether it approved, denied or changed the terms. The notice does not have to use the words "adverse action"; it may simply say the application was declined.

• Completed application, denied: notice within 30 days of receiving it.
• Incomplete application: within 30 days the lender either decides or asks you in writing for what is missing, warning that no answer ends the review.
• Counteroffer: a smaller amount or a higher rate instead of what you asked for. If you do not accept or use it within 90 days, the lender sends the notice then.

A written notice must give the lender's name and address, a statement of the federal law against credit discrimination, the agency that oversees that lender, and one of two things: the specific reasons for the decision, or a statement that they are yours on request made within 60 days. If you ask, the lender has 30 days to answer.

What the credit report part of the notice adds

When a credit report shaped the decision, even partly, the Fair Credit Reporting Act asks for more. Lenders often combine both notices in one letter.

The notice must also say that the credit bureau did not make the decision and cannot explain it. Send questions about the reasons to the lender, and questions about the data to the bureau. Your free reports from all three nationwide bureaus are also available weekly at annualcreditreport.com, as described in checking your credit first.

Turn each reason into a fix

Write the reasons down, one per line, next to the score factors from the credit report part of the notice. They often repeat each other, which tells you where to start. Most reasons fall into a handful of groups, and each points to a different next step.

If the report shows something that is not yours, or an account reported wrong, dispute it with the bureau. Funditia, our sister site, has a walkthrough on disputing credit report errors. Fixing a real error can change the result without any other change on your side.

When to apply again

No rule sets a waiting period. What matters is whether the reason on the notice has changed. A new application with the same income, the same debts and the same report will most likely get the same answer, and it adds another hard inquiry, which FICO scores count for a year.

1. 1 Fix one named reason and confirm the change shows on your credit report or your documents.
2. 2 Prequalify again with a soft check to see whether estimates have moved; soft and hard credit checks explains the difference.
3. 3 Try a different kind of lender if the reason was the lender's own limit, such as a minimum income; where to borrow compares banks, credit unions and online lenders.
4. 4 Apply in full only when an estimate is one you would accept.

If you think the denial was unfair

The Equal Credit Opportunity Act bars lenders from discriminating on the basis of race, religion, color, national origin, sex, marital status or age, because some or all of your income comes from public assistance, or because you exercised a right under consumer credit law in good faith. The notice names the federal agency that oversees the lender. You can complain to that agency or to the Consumer Financial Protection Bureau, and keep the notice, the application and any messages as evidence.

A lender that sends no notice at all within 30 days of a completed application has missed a legal deadline. Ask in writing for the decision and the reasons, and note the date you applied.

Questions people ask