Adverse Action and Credit Scores - Episode #75
What is an adverse action? In layman’s terms it’s a bad action or the opposite action that an applicant was hoping for such as denial of credit. The government decided to put rules in place when you are denied credit to make sure there is compliance. This way no one can deny you credit for whatever reason they want. If you are declined for a low credit score, you then have the right to check your credit score.
From the FCRA:
A portion of Section 603.
Definitions, rules of Construction(k) Adverse action.
(1) Actions included. The term “adverse action”
(A) has the same meaning as in section 701(d)(6) of the Equal Credit Opportunity Act; and
(B) means (i) a denial or cancellation of, an increase in any charge for, or a reduction or other adverse or unfavorable change in the terms of coverage or amount of, any insurance, existing or applied for, in connection with the underwriting of insurance; (ii) a denial of employment or any other decision for employment purposes that adversely affects any current or prospective employee; (iii) a denial or cancellation of, an increase in any charge for, or any other adverse or unfavorable change in the terms of, any license or benefit described in section 604(a)(3)(D) [§ 1681b]; and (iv) an action taken or determination that is
(I) made in connection with an application that was made by, or a transaction that was initiated by, any consumer, or in connection with a review of an account under section 604(a)(3)(F)(ii)[§ 1681b]; and
(II) adverse to the interests of the consumer.
(2) Applicable findings, decisions, commentary, and orders. For purposes of any determination of whether an action is an adverse action under paragraph (1)(A), all appropriate final findings, decisions, commentary, and orders issued under section 701(d)(6) of the Equal Credit Opportunity Act by the Board of Governors of the Federal Reserve System or any court shall apply.
Common adverse actions by landlords include:
- Denying the application;
- Requiring a co-signer on the lease;
- Requiring a deposit that would not be required for another applicant;
- Requiring a larger deposit than might be required for another applicant; and
- Raising the rent to a higher amount than for another applicant.
Normally, the consumer can get their credit report free for 60 days if they have been impacted by an adverse action.
(b) Adverse action based on information obtained from third parties other than consumer reporting agencies.
(1) In general. Whenever credit for personal, family, or household purposes involving a consumer is denied or the charge for such credit is increased either wholly or partly because of information obtained from a person other than a consumer reporting agency bearing upon the consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living, the user of such information shall, within a reasonable period of time, upon the consumer’s written request for the reasons for such adverse action received within sixty days after learning of such adverse action, disclose the nature of the information to the consumer. The user of such information shall clearly and accurately disclose to the consumer his right to make such written request at the time such adverse action is communicated to the consumer.
(2) Duties of person taking certain actions based on information provided by affiliate.
(A) Duties, generally. If a person takes an action described in subparagraph (B) with respect to a consumer, based in whole or in part on information described in subparagraph (C), the person shall
(i) notify the consumer of the action, including a statement that the consumer may obtain the information in accordance with clause (ii); and
(ii) upon a written request from the consumer received within 60 days after transmittal of the notice required by clause (i), disclose to the consumer the nature of the information upon which the action is based by not later than 30 days after receipt of the request.
(B) Action described. An action referred to in subparagraph (A) is an adverse action described in section 603(k)(1)(A) [§ 1681a], taken in connection with a transaction initiated by the consumer, or any adverse action described in clause (i) or (ii) of section 603(k)(1)(B) [§ 1681a].
(C) Information described. Information referred to in subparagraph (A) (i) except as provided in clause (ii), is information that
(I) is furnished to the person taking the action by a person related by common ownership or affiliated by common corporate control to the person taking the action; and
(II) bears on the credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living of the consumer; and
(ii) does not include
(I) information solely as to transactions or experiences between the consumer and the person furnishing the information; or
(II) information in a consumer report.
Adverse action is one phrase you hope never to hear. But, if you do hear it, you have rights and you can start working on your credit score if needed.
Tenants Credit Reports and Credit Scores - Episode #74
Tenants have rights when it comes to credit reports and credit scores. Landlords need to make sure they are following FCRA guidelines when it comes to these reports.
When can a landlord pull a credit report?
- If you own, manage, or are an agent for a property you may pull a credit report and credit score on a prospective applicant
- A landlord cannot pull reports for friends, relatives, himself/herself or for any fraudulent purpose
Legally landlords don’t need to show reports to consumers regardless of whether or not the application is accepted. In fact, some do
Adverse Action - FCRA requires the landlord to send a notice to the applicant informing him of the action taken and advising the tenant of his rights under the FCRA, including the right to obtain his consumer report from the screening service or credit bureau.
Tenant prospects don’t need to provide credit reports when they are applying for an apartment. However, many tenants strengthen their attractiveness by printing out their own credit reports and credit scores and including them in the application. Back in the heyday of a frenzied rental market in San Francisco, people would show up with a folder that included a blank check, an apartment resume, and their credit score and credit report.
Plus, you could save some money as 1 report with FICO score will cost you about $16, whereas the apartment landlord may charge you $30 for pulling your report. You won’t be able to force him/her to use your score, but some landlords will not check your report again saving you that charge.