Just going by pure statistics, the credit bureaus probably have at least one false item on your record, which they then tell to any creditor that cares to know. Most of these mistakes are minor, such as a wrong address, but some mistakes could prevent you from obtaining credit. While the major credit reporting agencies have dispute resolution processes, sometimes the only way to get them to take your complaint seriously is to sue them.
Can You Sue the Credit Bureaus?
Technically, you can sue individual creditors and the credit reporting bureaus for report false items on your credit reports, but the Fair Credit Reporting Act – the main piece of federal legislation governing credit reports – requires consumers that go through their state’s attorney general’s office first, unless the credit bureaus do not fix the error in a “reasonable amount of time.” The exact amount of time the FCRA requires you to wait is not explicitly stated in the legislation.
In general, most lawyers suing creditors or the credit bureaus for reporting false information do so under anti-defamation statutes or “negligent enablement of identity fraud” in cases involving identity theft, rather than FCRA. In some cases, and depending on the state in which you file a lawsuit, you can sue creditors under FCRA and other legal statutes. Some states, notably California and Massachusetts, managed to sneak in more liberal provision for their constituents to sue the credit bureaus into credit reporting laws.
Should You Sue?
You should always consult a lawyer regarding legal issues. In addition, you should consider the severity of the false information on your credit report. For example, most bad items, such as missed payments, expire after seven years, so it may not be worth your time to fix an error that will disappear in a few months.
Before you gather information for a lawsuit, factor in whether you can afford to sue too, which could cost tens of thousands of dollars. Some FCRA cases can take months, and possibly years in extremely difficult cases with multiple instances of the credit bureaus reporting false data. Keep in mind that you can sue for court costs, legal fees and damages. Some people have successfully sued the bureaus for hundreds of thousands of dollars in damages.
Alternatives to a Lawsuit
You can dispute any item on your credit report, and then dispute it again after you receive a verdict if you have additional documentation to prove your claim. Disputing items on your credit report costs nothing except for your time and maybe some postage.
If you apply for a loan, notify the lender of false negative information on your credit and back up your claim with proof. Regulation B of the Equal Credit Opportunity Act requires that lenders consider any information an applicant provides to prove his creditworthiness.
Equifax, Experian and TransUnion – the major reporting agencies – receive almost all of their information from your own creditors, so it is often easier just to ask creditors personally to correct erroneous data on your credit report.