How to Tell If You've Been Hit With a Higher Interest Rate on a New Credit Card

Chuck Sithe has no problem getting approved for new credit cards. In fact, he’s received several in the past few years. But along with them he’s also received letters he didn’t expect; ones that he knows are normally sent to consumers who are turned down. What gives?

Sithe is savvy about credit (he writes about it), so he knows that when lenders turn consumers down for credit cards they must provide them with notices stating the reasons for the denial, their credit score, and instructions on how to order their free credit reports.

But he’s received these notices when he was approved. Why? He wrote in an email:

I could think of two possibilities:

This text is meant for credit denials, and it’s mistakenly placed on credit approvals as well. If this is true, then we don’t really have a right to our credit report when we are approved.

All credit approvals have a certain extent of adverse action in them, since I technically could have been approved for a higher credit line, and they didn’t approve me for the higher line based partly on my credit score.

According to the Federal Trade Commission, if a lender denies a consumer credit based on information in a consumer report, it must provide an “adverse action” notice to the consumer. If it grants credit, but on less favorable terms based on information in a consumer report, it must provide a “risk-based pricing” notice.

But even consumers who are approved at the terms they applied for may get one of these letters. Why? Because figuring out who gets the notices can get complicated, and so the FTC says sending them to everyone is one way to comply with the law. In instructions to lenders, it says:

The Risk-Based Pricing Rule requires you to notify consumers if they are getting worse terms because of information in their credit report. An alternative way of complying with the Rule is to give a credit score disclosure notice to all customers, regardless of the terms on which you granted them credit (“credit score disclosure exception” notice).”

Look for This Letter

If you apply for consumer credit and don’t get approved at the very best terms, look for one of these notices. It will give you important information, including:

The name and address of the credit reporting agency that supplied the credit report used by the lender.
How to get a free copy of your credit report. (This free credit report, by the way, is in addition to the free annual credit reports consumers are entitled to by law.)

If a credit score was used in the decision, the lender must also provide you with information that includes:

Your credit score (the one used to make the decision).
The range of possible credit scores under the model used to generate the credit score (for example, the credit score range for most FICO scores and for VantageScore 3.0 is 300 to 850).
Four of the key factors that affected that score (but if one of the key factors was the number of inquiries, five factors must be listed).

Don’t Wait to Get One

This notice provides you with valuable information about your credit. But you don’t have to apply for credit to find out what’s in your credit report for free. And you don’t have to get turned down for credit to find out your credit score either. In addition to ordering your free credit reports once a year, you can get a free credit report summary from Credit.com, along with an action plan for your credit.

Anytime you can get a free credit report or credit score, take advantage of it. Your credit reports and scores change all the time, so staying on top of them is always a smart move.

And so is reading your mail.