What action must lenders take if they deny a credit application?

When lenders deny a credit application, they are required to provide a written notice to the applicant. This notice must include the reasons for the denial of the credit application. This requirement is part of the Equal Credit Opportunity Act (ECOA), which aims to ensure that consumers are treated fairly in the lending process. The rationale behind this requirement is to promote transparency and allow applicants to understand why their application was not approved, which can help them address any issues that may prevent them from obtaining credit in the future.

Providing a written notice allows the applicant to take corrective actions—such as improving their credit score or addressing specific issues in their financial history—which may enhance their chances of approval in future applications. This process not only serves the interests of consumers but also encourages lenders to be more diligent and consistent in their lending practices.

While reporting to the credit bureau, requesting additional documentation, and re-evaluating the application within a given time frame are important aspects of the lending process, they are not specifically mandated actions that must be taken when credit is denied. Therefore, the correct action for lenders when denying a credit application is to provide a written notice with the reasons for the denial.