Adverse action

or limits credit, insurance, or employment based on an applicant's credit report or other criteria, giving rise to the need for transparency and fairness in the evaluation process.

Example

A credit card company may take adverse action by denying an applicant's request for a new card or by lowering their credit limit on an existing account. In such cases, the company is in many jurisdictions required by law to provide the applicant with a notice explaining the reasons for the adverse action, giving the applicant an opportunity to understand and potentially rectify the factors that led to the unfavorable decision.