When credit may lawfully be denied, and income a lender must consider

Evaluate repayment, not stereotypes

The Equal Credit Opportunity Act and Regulation B prohibit discrimination in any aspect of credit. A creditor may deny an application for legitimate creditworthiness reasons, such as insufficient income for the requested debt or an unacceptable repayment record, when it applies lawful standards consistently. Membership in a protected group neither requires approval nor permits denial. Race, color, religion, national origin, sex, marital status, qualifying age, public assistance income, and good-faith exercise of protected credit rights cannot serve as unlawful reasons for a decision. See 15 U.S.C. § 1691(a) and 12 C.F.R. § 1002.6(a)-(b).

Count income fairly

Do not exclude or discount income because it comes from part-time work, an annuity, a pension, other retirement benefits, or a prohibited basis. Public assistance income also receives protection. The creditor may evaluate the amount and probable continuance of income. A documented shortfall can support denial; prejudice against the income category cannot. When an applicant relies on alimony, child support, or separate maintenance, consider those payments to the extent they are likely to be consistently made. Protection does not require counting uncertain payments as guaranteed. See 12 C.F.R. § 1002.6(b)(2), (5).

Use individual evidence

Do not predict reduced income from assumptions or group statistics about childbearing or childrearing. Evaluate married and unmarried applicants by the same standards, and do not prefer married joint applicants over unmarried joint applicants. When credit history is evaluated, consider available shared-account history and, on request, information showing that the history being considered inaccurately reflects the applicant's creditworthiness. On request, consider available spouse or former-spouse account history that the applicant demonstrates reflects their own creditworthiness. See 12 C.F.R. § 1002.6(b)(3), (6), (8).

Age protections have specific exceptions: a qualifying statistically sound scoring system may use age without assigning an elderly applicant's age a negative value; judgmental evaluation may use age to determine a pertinent element of creditworthiness. Age may also be used to favor an elderly applicant. Immigration status may be considered to ascertain repayment rights and remedies, but national-origin discrimination remains prohibited. These narrow permissions are not licenses to use stereotypes. See 12 C.F.R. § 1002.6(b)(2), (7), (9).

Explain the actual decision

After a completed application, the general notification deadline is thirty days. An applicant receiving adverse action is entitled to specific reasons, provided directly or through the permitted request procedure. A lawful denial identifies the actual credit problem rather than disguising a prohibited reason. See 15 U.S.C. § 1691(d).