Federated Department Stores Inc., one of the nation's largest retailers, has agreed to tell customers when it uses credit agency information as a basis for denying credit, the Federal Trade Commission said yesterday.

The agreement means that the FTC will drop a proposed complaint charging that Foley's, a Houston-based division of Federated, "repeatedly violated the Fair Credit Reporting Act (FCRA) when denying credit applications," the FTC said.

The consent agreement does not constitute an admission of guilt.

Foley's operates 14 department stores in Texas. The agreement to "cease and desist" from practices violating the act is binding on all Federated stores.

The company, which is based in Cincinnati, operates more than 590 stores across the nation, including chains such as Bloomingdale's, Filene's, I. Magnin, Bullock's and Foley's.

The FTC's proposed complaint alleged that Foley's violated the act by not informing credit applicants that the store used credit agency information as a basis for denying credit. Foley's also failed to tell rejected applicants the name and address of the credit bureau used, the FTC said.

The FCRA requires creditors to provide such information so consumers can check the credit agency to be sure it has accurate information and challenge it if necessary. Credit-reporting agencies, or credit bureaus, are organizations that gather and sell information on consumers' credit histories to creditors.

Foley's has agreed to comply with the law and to review all credit applications it rejected from January 1983 to February 1985. Foley's then will send appropriate credit information to all consumers whose applications were denied because of credit agency reports and who did not receive the proper notification.