If a borrower is denied a loan due to not meeting credit score requirements, what must the lender provide?

When a borrower is denied a loan due to not meeting credit score requirements, the lender is obligated to provide an Adverse Action Notice. This notice is a critical component of the Equal Credit Opportunity Act (ECOA) and the Fair Credit Reporting Act (FCRA), which mandates that lenders inform borrowers about the reasons for their denial.

The Adverse Action Notice serves several important functions. Firstly, it must include the specific reasons for the denial, such as the credit score issue, and any other relevant factors that contributed to the decision. Additionally, it informs the borrower of their right to obtain free copies of their credit reports from the credit bureaus used in the decision-making process and provides information on how to correct any inaccuracies that may exist on their credit report.

This transparency helps borrowers understand the circumstances behind the loan denial and gives them the opportunity to address those issues, potentially leading to better credit standing and the possibility of securing funding in the future. The other options, while they may sound relevant, do not encompass the legal requirements set forth to ensure borrowers are informed effectively about adverse decisions impacting their credit.