united-states defamation
Credit scores &amp; defamation
<p>Suppose you apply for a loan and are denied or are offered undesirable terms on the basis of a bad credit score as reported by one of the reporting bureaus. After reviewing your report you find nothing incorrect on it but nothing (in your opinion) to justify a low score. What recourse do you have? Might a lawsuit alleging defamation succeed, or are the CRBs protected from that somehow? Would the CRB have to reveal its scoring algorithm in open court? If  damages are small enough would they have to respond to a summons to small-claims court? What's the situation?</p>

<p>To be clear, I'm not talking about inaccurate information on the report, but a score based on accurate information which you feel unjustly defames you by misrepresenting your good credit. Also, assume the CRB refuses to change your score.</p>

<p>If a statement is true, it cannot be defamatory.  In your hypothetical, the credit bureau calculates a score based on correct information. There is no false statement anywhere, so there can be no defamation.</p>

<blockquote>
  <p>Can you add some explanation of how giving someone a credit score lower than what his credit history merits is different from simply lying about that person's credit history? When I say "merits" I mean a score that would result in treatment by lenders that is significantly more consistent with what people with similar histories typically get.</p>
</blockquote>

<p>I presume that credit bureaus use a deterministic algorithm to calculate credit scores, in which case it wouldn't be possible to "give someone a credit score lower than what his credit history merits."  More accurately, it wouldn't be possible to do that without bypassing the algorithm in some way.</p>

<p>You might be able to argue defamation if you could prove that the credit bureau did in fact bypass its algorithm when it assigned your credit rating.  You would probably have to show that your reputation was damaged because someone (i.e., a lender) knew that the ratings were deterministic and drew incorrect conclusions about you based on your incorrect score.</p>

<p>The problem here will be to show that the credit rating was erroneous given the credit bureau's algorithm.  To do that, you'd have to get your hands on the algorithm, which seems like it would be impossible to do, so you could do the calculation yourself.</p>

<p>Even if you <em>can</em> do that, a more likely strategy would be to pursue the credit bureau under the <a href="https://en.wikipedia.org/wiki/Fair_Credit_Reporting_Act" rel="nofollow">Fair Credit Reporting Act</a> or some other consumer protection law.</p>

<p>A credit agency or a lender may use its own formula for deriving a credit score based on various facts about an applicant's credit history. That score need not map closely with other formulae for the purpose devised and used by other score vendors or  lenders. A score is, in essence, a statement that "Given X set of facts, we think the likelihood of default is Y". This is not defamatory as long as the facts have been input honestly and the formula has been applied fairly (even if it is ill-judged). One formula might weight home ownership high, and give low scores to renters.  Another might rate steady income high, and give low scores to those seasonally employed or self-employed as consultants. Neither would accord with the most common practice, but a lender may use either if it so chooses, and your only recourse is to approach a different lender that uses a different model.</p>

<p>The score is not a fact, the score is an assessment of the significance of the various facts in the credit history. Credit bureaus generally give lenders the full history as well as a score, and lenders can and do modify their decisions based on the details of the history when they think that the score does not accurately reflect the individual history.</p>

<p>Nor is the lender required to tell you how the score is derived from the facts of your credit history. It is (under the US Fair Credit Reporting Act) required to indicate what facts went into the judgement (if you ask), and investigate if you claim that the stated facts are incorrect. </p>

<p>If someone intentionally falsified facts to your detriment, or bypassed the usual formula and simply invented an unfavorable result in your specific case only,  that would be improper and you might well have grounds for action if you could prove it. But if you simply disagree with how the lender's model weights the various facts, which you admit are correct,  I don't think you have any grounds to claim defamation.</p>
