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?

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.

  • I'm tagging this with united-states to focus the answers; if that's not your intended jurisdiction, edit your question to include the correct one instead. – jimsug Jul 21 '16 at 13:58
up vote 4 down vote accepted

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.

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.

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.

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.

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.

Even if you can do that, a more likely strategy would be to pursue the credit bureau under the Fair Credit Reporting Act or some other consumer protection law.

  • And, the score is their opinion of your credit. It is not a statement sufficiently factual such that it could be be proven as false. – user3851 Jul 21 '16 at 14:48
  • 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. – Patrick87 Jul 21 '16 at 14:50
  • @Dawn Can you elaborate on why the score would constitute an opinion? Whether or not you pay your loans and bills seems to be a question of fact, not opinion. I mean, saying "X spits in the food he serves at his restaurant" is defamation or not regardless of whether I say "in my opinion" first, right? – Patrick87 Jul 21 '16 at 14:56
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    It is opinion because how can you prove it wrong. If I heard that my score is 598, how could I prove that wrong? What is my objectively correct score? You are correct that saying "in my opinion" doesn't necessarily make something an opinion for defamation analysis. Whether or not you pay your bills is a question of fact. The degree to which you are likely or not to pay future bills is a matter of opinion. – user3851 Jul 21 '16 at 15:05
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    @Dawn It sounds like the consensus here is that the score would be protected opinion. I am still not so sure. Milkovich v Lorain Journal Co seems to say that opinions which imply defamatory facts are not protected opinions. If you have a score the CRB considers "poor" or worse, I think a reasonable person might infer that this is because of poor or insufficient credit history. Otherwise, people must believe the score isn't derived from the information in the report, which - if claimed - might result in less use of their scoring systems. – Patrick87 Jul 21 '16 at 17:03

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.

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.

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.

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.

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