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If your credit has been destroyed and you think your bank or credit card issuer is to blame, you may, in fact, have some legal recourse. But you’ve got some work to do leading up to your day in court.

The Fair Credit Reporting Act (FCRA) requires financial institutions (and other data furnishers) to provide fair and accurate information to the credit reporting agencies. So if there’s an error (or errors) on your credit reports that’s severely damaging your score, and the issuer continues to report it, you could file a suit — after you’ve clued in the credit bureaus and given the financial institution a chance to conduct a reasonable investigation.

“The consumer cannot sue the issuer unless the consumer writes a dispute letter to the credit reporting agency first,” Troy Doucet, a consumer attorney in Columbus, Ohio, said in an email. “If the dispute letter does not result in a correction, then the consumer can sue the issuer.”

The Lay of the Law

To illustrate proper protocol, Doucet provided the following example: Let’s say your bank is reporting a late payment on your credit card to a major credit bureau — information that’s false because the bank accidentally credited your check to someone else’s account.

“You have proof your check was cashed, so you send a letter to [the bureau] disputing the late payment,” he said. The bureau “contacts your bank and the bank refuses to update the credit report. You can then sue your bank under the FCRA for failing to update the false information.”

There are a few other instances where a person may be able to file a claim against a bank regarding their bad credit.

For instance, if “ruined credit causes someone not to get a job or not to get another loan, then they may have a cause of action against their bank for ‘interference of contract’ or ‘interference of business relations,'” Doucet said. “They might also have a claim under state law consumer protection statutes.”

That said, courts generally don’t permit people to file defamation claims for false credit reporting.

“Most courts have determined that the information in a credit report is not sufficiently ‘public’ to trigger that kind of violation,” Doucet said.

Dealing With Bad Credit

Remember, it’s important to check your credit reports regularly for errors that could be behind a bad score. You can do so by pulling your credit reports for free each year and viewing your free credit report summary, updated every 14 days, on Credit.com. If you do discover something amiss, you should notify the credit bureau(s) in question. You can learn how to dispute errors on your credit report here.

If you’re having trouble getting issues resolved, you may want to seek some outside help. A reputable credit repair company, for instance, will be upfront about exactly how it can and cannot help you and won’t promise a specific improvement to your credit score (that’s illegal). You could also consult a consumer attorney about a potential claim. You can go here to learn more generally about fixing your credit.

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Image: KatarzynaBialasiewicz

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