How many months must credit applications be kept on file after notifying the consumer regarding approval or adverse action?

The correct timeframe for retaining credit applications after notifying consumers about approval or adverse action is indeed 25 months. This requirement is outlined in regulations such as the Equal Credit Opportunity Act (ECOA) and the Fair Credit Reporting Act (FCRA), which demand that creditors maintain records of credit applications for a specified period to ensure compliance and facilitate potential audits or reviews.

Keeping records for 25 months helps ensure that institutions can demonstrate adherence to fair lending practices and respond adequately to inquiries or disputes that may arise during this period. This retention policy also aids in tracking trends in credit denials and approvals, which can be useful for improving lending practices and addressing systemic issues.

In contrast, the other timeframes mentioned do not meet the regulatory requirements established for record retention in credit lending, emphasizing the importance of the correct duration of 25 months for maintaining credit application files.