Can I Sue If a Credit Report Error Hurt My Score?

We often encourage readers to get their free annual credit reports, learn to read them, check them for errors and dispute any information that is inaccurate. It sounds so simple. But readers tell us that getting information corrected — or even keeping it corrected — isn’t always easy.

Our reader JG found errors, disputed them, and now has a fully corrected credit report. His credit report had a wrong date of birth and a $20,000 balance on a credit card that actually had a balance of zero — and had for a year. JG’s credit score was 715 as a result of the mistakes, he says. That score has now risen to 786. JG did not say which credit score he was looking at — and that matters. Using one of the scores used in Credit.com’s Credit Report Card (a free tool that updates two of your scores every month), JG’s scores would have dropped from the “excellent” range down to near the bottom of the “good” range.) JG’s question: “Do I have any recourse?”

We asked consumer lawyer Leonard Bennett. His answer? Maybe.

The Impact of Credit Report Errors

First, a wrong date of birth is unlikely to have much impact on JG’s credit scores since age is not a factor used to calculate scores. However, the error does suggest JG’s files may be mixed with someone else’s, and it should be addressed.

But a $20,000 balance reported on a credit card that actually had a zero balance could most certainly send JG’s credit scores sliding. One factor used to calculate a credit score is credit utilization, or the percentage of available credit a person is using. For most of us, a $20,000 balance would noticeably increase our credit utilization. It’s a good idea to keep that number no higher than 25% or so; lower than 10% is even better.

Correcting the reports “after a year and multiple disputes may not fully remedy the damage done,” Bennett said. The key is harm done. Did JG lose out on a mortgage because the lender required a higher score? Did he have to pay a higher interest rate on a car loan? Those would be examples of damage suffered because of the error. “If there were disputes made and rejected or uncorrected, there is still a private right of action for the period during which the inaccuracy continued,” Bennett said in an email.

Another reader, “bocajim,” said his wife can’t seem to get a black mark off her credit report due to insurance the lender charged her after her loan was paid off. Since the loan on the property in question has been paid off, the insurance was not necessary to protect the lender. But they billed it for her anyway. It appears they agreed to remove the insurance after she complained but reported her late for not making payments on her already-paid-off loan while the problem was being straightened out. The bank has agreed by phone to take the mark off, but nothing has happened, bocajim said. “It’s like the banks can do whatever they want with no recourse,” he commented.

Bennett said that in this case, claims could be made against the bank and the credit reporting agencies. “As always, it would depend on the specific dispute facts — the details and substance in the dispute letters; the accuracy of the consumer’s factual assertions and possibly any damages from the inaccuracy,” he said.

What To Do About Credit Report Mistakes

There are several lessons to be learned from these stories:

Review your credit reports periodically to make sure they are accurate. At a minimum, review your free credit reports each year.
Monitor your credit scores. That way you’ll be able to see what impact any mistakes have on your credit scores.
Keep excellent written records of your disputes. Letters sent via certified mail, return receipt requested, can be very helpful. In addition, if you are turned down for credit or charged more as a result of an error on your reports, keep the letter that explains that.
If you try unsuccessfully to straighten out a mistake, consider getting help. You can file a complaint with the Consumer Financial Protection Bureau or talk with a consumer law attorney if you can’t fix the problem on your own.