Credit reports play a major role in our financial lives. They affect how favorable the rates and terms are when we secure loans if we can secure loans or credit cards, rent properties, or even land a job. Unfortunately, even though there are measures in place to prevent them, credit report errors happen, and they can lead to significant negative consequences.
Those consequences could be as simple as higher rates on a credit card, but they could also mean being turned down for jobs and even housing.
When inaccurate information hits your credit report, you may be wondering if you can sue for false reporting, and if so, when. The truth is, there is a point where you’ll be justified in taking steps to resolve things legally. We’re going to take a look at just what exactly constitutes false reporting, what the Fair Credit Reporting Act (FCRA) is and what that matters, and what your rights are as a consumer.
In the end, we’ll show you how to take steps for legal action against those who violate those rights, when other avenues of satisfaction have been exhausted.
False reporting can occur in several different ways, with each one leading to a flawed credit report. Below are some of the most common examples of false reporting:
When a collector reports inaccurate information to credit bureaus, it can damage your credit score. Inaccuracies can range from simple clerical errors and typos to more severe cases like identity theft or mixed credit files. Some of the most common examples of inaccuracies include:
● Incorrect payment histories (like late payments when you've paid on time)
● Wrong loan amounts or credit limits
● Incorrect account statuses (open vs. closed)
● Accounts mistakenly reported as delinquent or in collections
● Wrong accounts due to identity theft or mixed files
Sometimes, while rare, creditors may report the same debt more than once, making your credit report look like you’ve got more debt than you do. This can throw off your debt-to-income ratio, or make it appear like you’ve got more loans out than you do. No matter what happens, it causes your score to drop because now you have inflated debt in the eyes of anyone checking.
Duplicate reporting can happen when an account is transferred between collection agencies or is sold from one creditor to another. This can also happen when a creditor fails to remove one a previous reporting entry, often after updating it. Getting duplicate reports removed is critical to your credit health, but the dispute process for them can be tedious and even confusing.
Credit reporting bureaus are required to remove negative information from your report after a specified period, which for most debt is 7 years. This means that if you have a debt reported on your credit report that is older than 7 years, there is a good chance that it’s being reported in violation of the FCRA.
One of the few exceptions to this is bankrupcies, which can remain on your credit report for up to 10 years, and some civil and criminal judgment information that can stay indefinitely.It’s essential to review your credit report at least once per year and make sure that no outdated information is being reported.
The FCRA is a federal law dating back to 1970 that was designed to protect consumers from false and slanderous credit reporting. The law places regulations on how credit bureaus and entities that furnish them with information, are to handle, collect, maintain, and protect that information. As a consumer protected by the act, you are granted very specific rights by the FCRA, which we’ll get into below.
The FCRA grants you the right to dispute any inaccurate information on your credit report. If you find an error, you should file a dispute immediately with the credit bureaus, Equifax, Experian, and TransUnion. The credit bureaus must conduct a good-faith investigation of the dispute and correct any errors found within 30 days from the receipt of your dispute. There are some exceptions to this, but they are rare.
You can file a dispute via written mail or digital submission forms provided by each of the bureaus. The letter or form must identify the disputed item, explain the inaccuracy, and provide proof or supporting documentation that helps substantiate your dispute. If the investigation shows the information is inaccurate, the creditor must notify all three bureaus to correct the record.
The information cannot be verified or is found to be false, it must be removed entirely.
Another major right you’re given under the FCRA is the right to sue a creditor that knowingly or negligently reports false information to any of the credit bureaus. However, before taking legal action you should make an effort to go through more conventional channels by disputing the issue with the bureaus. If these efforts prove to be unsuccessful, you can consider filing a lawsuit.
If you can prove that the credit violated the FCRA, you may also be eligible to recover any actual damages that you’ve suffered as a result, as well as statutory damages on a per-violation basis, and potentially even punitive damages to punch a creditor for particularly egregious or even willful violations. Additionally, you can also claim legal expenses as part of your damages, along with court costs and filing fees.
One thing to keep in mind, however, is that there are time limits involved, known as the statute of limitations. If you plan to file a lawsuit for FCRA violations, typically you’ll need to do it within two years from the date it was discovered, or five years from when the violation occurred, whichever comes first.
To make sure you stay on the right side of all time limits, it’s critical to work with experienced legal representation.
If all other attempts at resolution are failing, you may want to consider suing the creditor for false reporting. In most cases, you’ll want to secure legal representation, though some people have gone through the process successfully by themselves. Here’s how you should take action against a creditor.
First, seek legal representation from an attorney experienced in credit-related disputes and FCRA violations. Your attorney should be well-versed in credit law so that they can advise you on the best course of action and provide the guidance necessary to get through the complex legal process of suing a creditor or credit bureau.
Once you’ve found the right legal representation, your attorney will be the best source of guidance on how to prepare for the lawsuit. The suit will usually be filed in a state or federal court, depending on the specifics of the case you’re bringing and the damages being sought.
Once the lawsuit is filed, the defendant will be served with a summons and a copy of the complaint that was filed, which is their official legal notice of impending legal action. They will usually have a period of 20-30 days to respond, either by admitting or denying the allegations or by presenting their defenses.
In the pre-trial stage, both sides will participate in discovery, where they exchange documents or evidence relevant to the case. This may also involve negotiation and settlement attempts between you and the creditor, which if successful, will often resolve the case to the satisfaction of both parties without the need for a trial.
If your case goes to trial, there will be a judge or jury who will ultimately decide if the creditor violated the FCRA, and if you’re subsequently entitled to damages. Some of the potential outcomes include receiving compensation for actual damages, statutory damages, punitive damages if the case warrants it, and even court costs and legal fees.
Another possible outcome is that the case is resolved through a pre-trial settlement, where the defendant agrees to correction or removal of the false reporting, and to compensate you without admitting liability.
If you have tried the phone calls and disputes, exhausting all other potential avenues for resolution, and your false reporting persists, you may be eligible to bring legal action against the reporting entity and the credit bureau.
Fair Credit can help you take legal action to help clear your credit inaccuracies, and as experts in FCRA cases and credit disputes, we are uniquely equipped to help you find the best course of action for your claim. Remember to address false reporting as soon as you discover it, and then start the dispute processes immediately.
If disputes and CFPB complaints don’t get you a resolution, reach out to Fair Credit to discuss potential legal action. We can help you get a resolution that ensures your credit report is accurate, and that you’re compensated for your damages.