Need to check the state landlord and tenant law

This dispute may end up in a small claims court. Each state has different landlord and tenant law. If you are in a tenant friendly state, you will have more chance to win the case. Check out whether you have an inhabitability clause in the lease or in the state law.

If the management insists reporting the incident to credit buearau, you may consider suing them at a small claims court.

Possible claims (depending on various state law)
1) personal injury, pain and suffering
2) reimbursement (what you paid for pest control)
3) overcharge (carpet was old and already damaged by infestation)
4) penalties (if you terminate your lease properly, you are entitled to get your security deposit back. If not, you may request a penalty up to three times the deposit amount
5) attorney's fee (find a good attorney friend who can help you without charging you)
6) Other far-fetched claims:
a) possible violation of city's health ordinance
b) possible violation of state consumer protection law (if yes, you may request three times deposits)
c) possible fraud or misrepresentation