What’s an Adverse Action Notice?

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.

, - January 4, 2019

When you apply for credit and you’re denied, under the Fair Credit Reporting Act (FCRA), the landlord, dealer, lender, or, even, employer must send you an adverse action notice. This letter basically explains why your application was turned down.

What Does the Adverse Action Letter Mean?

Seven to 10 days after applying, you either receive an adverse action notice or a call stating you’re approved and can move forward. If you get an adverse action letter, it should list the reasons why you were denied credit and include up to two factors that contributed to the denial. In addition, the letter must list which credit bureau provided the credit report and explain how you can get a free copy of your credit report from that bureau and dispute any inaccurate information. Generally, you have 60 days to get your free copy, but this can vary.

If you were denied for reasons outside of your credit score and report, you should still get an adverse action letter. Just like the credit-based adverse action, the notice lists the reasons why you were denied, although, in this instance, you don’t qualify for a free copy of your credit report.

What to do Now?

Once you receive the letter, use the free copy of your credit report – if you were denied for a credit-based application – to start rebuilding your credit. When you check your credit report, look for errors and dispute any immediately. After that, you should check your credit score so you know where it currently stands.

From there, you can work on improving your credit score to buy a car. It isn’t going to happen overnight, so be prepared to wait a few months before you see any change. You can fix your credit yourself by doing three things:

  1. Keep up with paymentsThe FICO score is the most common credit score used by auto lenders, and payment history makes up 35 percent of it. Make sure you stay on top of your payments each month and avoid missing any.
  2. Reduce debt – You don’t want to have a high credit utilization ratio, and if you have high credit card debt, work toward reducing and even eliminating it.
  3. Have a mix of credit – This may sound counterintuitive, but adding lines of credit can actually improve your credit score. The tricks are to manage them responsibly and pay off each line of credit you have every month.

If all of this feels overwhelming, you can try a credit repair service to help you start rebuilding your credit. Just be aware that you have to pay a fee, and that you may not need one if you carefully plan and prepare ahead of time.

The Bottom Line

If you’ve been turned down for auto financing and have an adverse action notice, it isn’t the end of the world. You can still get the financing you need even if you were turned down the first time. If your credit is the reason you were turned down for a car loan, then maybe all you need is the right lender. At CarsDirect, we can help you find the right dealership.

This is because we work with a nationwide network of special finance dealers with the lenders available that can help people in all sorts of credit situations, including bad credit, no credit, bankruptcy, and even repossession. Don't wait any longer to get the vehicle you need! Just fill out our free and easy online car loan request form to get the process started.


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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.

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