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Credit denial, which is also sometimes called "credit rejection," is an event during which a person or company that has applied for a line of credit is turned down. There are a number of reasons why an application for a line of credit may be denied. The two major reasons are a lack of credit history and a bad credit history.
A lack of credit history is a situation in which a person has never before maintained a line of credit or has only maintained a very limited line of credit. A credit denial may ensue if a person with no credit history applies for a line of credit or if a person with a limited credit history applies for a line of credit that will make large amounts of money or credit available to them. A bad credit history can also lead to credit denial. One's credit history may be seen as poor by a credit institution if one has previously been late on payments, defaulted on loans, or applied for bankruptcy. There are a number of other factors that a credit institution may look into, but these are the key points that lead to credit denial due to poor credit.
Another reason for credit denial may be lack of information. If the applicant does not include enough or sufficient information in his credit application, this may result in credit denial. In these cases, the applicant may have the opportunity to apply for credit once again with a more complete or amended application. In cases where a person experiences credit denial due to poor credit or no credit, however, it is unlikely that a second application will result in a positive response from the credit institution. All that can be done is to work on improving one's credit history and try again with a new application at a later date.
In the United States of America, under the Equal Credit Opportunity Act, a federal law enacted in 1974, credit lenders must respond to credit applications within 30 days. If an application results in a credit denial, the credit lender must offer a reason for the denial. The reason cannot be based on age, nationality, marital status, race, or a person's dependence on public assistance. If a person is denied credit due to credit history, he has the right to see a copy of the credit report that led to that denial.