It's true but part of the problem is also that people submit to it. The credit system "works" because for the most part, the information they provide is legitim

It's true but part of the problem is also that people submit to it. The credit system "works" because for the most part, the information they provide is legitimate enough, to the detriment of victims of fraud who now have to prove their innocence. If people with the means (those that have "fuck you" money and can afford to walk away) suddenly turn around and say "nope" and are happy to have bad/fraudulent credit, the entire credit system collapses - banks need to lend to survive and if the credit system stops being useful in verifying someone's creditworthiness (because even creditworthy people's records are contaminated with bad/fraudulent data) then banks will switch to a different system that doesn't have these problems (and that system could be to manually search for bankruptcy records and evaluating proofs of income, like it's done in many European countries), or lose out to those who switch because the "fuck you money" people will prefer them as they're willing to ignore the credit history system and use alternative means of evaluating creditworthiness. Of course, a legal solution that outlaws this privacy nightmare is best, but that's a lost cause in the US. The market-based approach described above is more likely to work.