Couple lose fight over credit reference: £1m legal bill


High Court

Michael and Carol Ann Gatt have had their case against Barclays rejected by the High Court. They were arguing that Barclays had made a mistake and told credit reference agencies that Mr Gatt was over his overdraft limit. The result, they claim, was the end of their business and financial ruin.

So what happened, and could a credit reference land you in trouble?

The case

The couple, both aged 66 and living in a bungalow near their former mansion in the Cotswolds, had taken the bank to court, claiming that its negligence had ruined them.

According to The Telegraph, they said that Barclays was asked for a credit report when they applied for a remortgage, and that it had recorded that Mr Gatt's account was £260,000 overdrawn - with a limit of just £1,500. This left them unable to borrow, so their business fell apart, their £4 million home was repossessed and Mr Gatt was made bankrupt.

They sued for £3 million, blaming Barclays. They argued that the bank had given him permission for this debt, and therefore it shouldn't have affected his credit report. The Judge, however, disagreed.

Judge Patrick Moloney QC said Mr Gatt had been given a higher overdraft limit temporarily, but that this had been reduced to £1,500, at which point the account was delinquent. This means that the information provided to the credit agencies was "true and not misleading".

He added: "It is more probable that, like so many others, the Gatts, who had prospered on the rising market but had spent their profits and continued borrowing beyond their means, would not have been able to survive the falling market even if these credit reports had not been published, and even if they had continued to speculate with more borrowed money into 2009."
The couple are left with costs of £1 million.

Are you safe?

Clearly this is an extreme case, but it's a timely reminder of how important it is to ensure our credit reference is in good shape, so we can be certain that if we need to apply for a mortgage, credit card or loan we will get the best possible rate.

There are five useful steps we can all take to improve our rating.

1. Check your credit report for any errors

These can be accessed though firms such as Experian, Equifax and Call Credit. However, don't be persuaded to pay through the nose, you can get a statutory report for £2.

If there are any errors, contact the organisation concerned and raise a complaint. You may have to spend some time clearing up any misunderstandings, but it's worth the effort if it means you are not overcharged for borrowing.

2. Pay your bills on time.

Moneysupermarket says: "Paying bills on time shows a lender that you are able to manage your finances effectively, even if it's just the minimum amount. Avoid missing or late payments as these can leave a black mark on your credit score."

"If you think you're unable to make a payment, contact your lender as soon as possible. Paying by direct debit or standing order safeguards as it ensures you will never be late making a payment and lenders like it as they know they will receive money from you every month." You also need to stick within your borrowing limits every month, to show lenders you can control yourself.

3. Register to vote.

The electoral register is always checked when you apply for credit, so if you're not registered you won't be able to borrow.

4. Borrow money

It seems counter-intuitive, but Moneysupermarket explains: "Proving you can be responsible managing credit is essential. Providers will assess potential customers on their previous behaviour and will look for signs that you are capable of repaying money, which can be frustrating for those without a credit history to secure credit."

"While you don't want to access too much, the trick is to build up your history slowly. It is worth considering opening an account to establish credit history - even if you pay it off in full each month. Ensure you have a bank account and pay your bills on time as this will help to show that you can manage your finances and are a good candidate for credit."

"If you use a mobile phone then having it on contract and paying it in full and on time with a direct debit to prevent missing a payment can have a positive impact on your credit profile. "

5. Think carefully before you apply for credit

If you make lots of applications for very competitive credit cards this will show up on your profile and will put lenders off. Do your research, find out what is available to someone with a record like yours, and only then should you make an application.

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