While there are regulations that protect you when seeking credit, there is no law that guarantees credit approval. Some reasons why your application may be denied include:
- You do not meet the creditor’s minimum income requirement;
- You have not been living at your address or working at your job for the required amount of time;
- You are too near your credit limits; and
- The information contained on the credit report is incorrect.
Although a creditor may consider various elements when reviewing your credit, it is forbidden to request or to review personal information pertaining to sex, martial status, race, national origin, child support, or public assistance income.
The Equal Credit Opportunity Act ensures that all consumers have an equal chance to obtain credit and requires that a creditor explain its reasoning when declining your credit application. Specifically, the Act requires that the creditor:
- Provide a notice that tells you exactly why the application was rejected; and
- Give you the opportunity to request an explanation if you ask within 60 days.
Discussing the outcome of your application with your creditor can be extremely beneficial. The creditor may be able to offer information regarding:
- How you can decrease your current credit obligation;
- Which reporting agency provided your report (then, you can request a free copy of your credit report to examine for problems or errors); and
- Whether you can reapply in the future.