Question

If you are denied credit, the creditor is not legally obligated to say why:

a) True
b) False

Answer 1

False. The statement that a creditor is not legally obligated to inform you why you were denied credit is false. Under the Fair Credit Reporting Act, the creditor must provide specific reasons for denial, ensuring the credit decision process is fair and based on factual financial information.

Step-by-step explanation:

If you are denied credit, the statement 'the creditor is not legally obligated to say why' is false. According to the Fair Credit Reporting Act (FCRA), creditors are required to provide you with a notice that includes the specific reasons for your credit application denial or if your terms are less favorable than most other consumers receive.

The reasons must be specific and cannot be vague statements like 'you do not meet our criteria'. This is to ensure that lenders make their decisions based on factual information such as your credit history, your income, your debts, etc., ensuring the process is a fair way to make a credit decision.

Lenders are expected to base their decisions on these factual elements, without considering aspects such as race, gender, religion, and other non-financial factors. Additionally, while a bad credit score can impact your ability to borrow money and the interest rates you're offered, it does not haunt you forever, as credit scores are dynamic and can improve with responsible financial behavior over time.

Answer 2

The answer is b) False. In most cases, if you are denied credit, the creditor is legally obligated to provide a reason for the denial, which falls under the Fair Credit Reporting Act (FCRA). This law helps ensure that consumers have the right to know why they were denied credit and gives them the opportunity to address any issues that may have led to the denial.