Adverse action

means denying or limiting credit, insurance, or employment based on an applicant's credit report or other criteria. Because of that, the evaluation process must be transparent and fair.

Example

A credit card company may take adverse action by denying an application for a new card or lowering the credit limit on an existing account. In many jurisdictions, the company must provide a notice explaining the reasons for the adverse action. This helps the applicant understand, and in some cases address, the factors behind the decision.