What is a Credit Reference? All the Information You Need
What is a Credit Reference? All the Information You Need
Posted on January 16, 2023
Credit references are gradually becoming more prevalent in our lives. What started off as a straightforward question when applying for a loan gradually expanded to applications for apartments and even jobs.
Therefore, what exactly is a credit reference and should you offer one if requested?
What is a Credit Reference?
A personal or professional reference is required during a job application, just like a credit reference. It is a document from a company with which you have done business outlining your payment history.
It differs from looking up your credit report in that it is a personal recommendation made in confidence by someone with whom you have dealt financially.
How Do Credit References Work?
Consider that you are requesting a business loan or perhaps a loan for a car. Even though the lender looks at your credit history and finds excellent news, they are still unsure that you are a secure risk.
The lender requests that you provide a credit reference. They should give the precise details they require, such as the size of the accounts, the number of timely payments, the number of late payments, and so forth.
You then go to a company and ask them to give you a credit reference that includes the data the possible lender is looking for. You provide that organization your consent to release the information on your behalf.
Either you or the lender will receive the credit reference from that organization, depending on your preference.
What's Included in a Typical Credit Reference?
As mentioned above, the potential lender will likely have specific questions they want answered. You should ensure any credit reference you provide will include those.
A typical credit reference should include:
- Details of accounts held with the organization and the nature of the relationship
- The length of that relationship
- An overview of your payment history to include any missed payments and a summary of your payment history
- Any identifiable markers to link you to those accounts
- The amount of credit you have used, paid or requested
- Any current outstanding balances held with that organization
- Specific answers to the questions posed by the potential lender
It's not necessary for a credit reference to include a detailed history of all your financial transactions. It might be a straightforward letter detailing your connection.
For example:
(Organization) has had (Applicant's name) as a client since (date). They consistently make payments on schedule and regularly use our exchange services. Their account has never been suspended for any reason, despite the fact that they have ordered from us a total of (amount relevant) in currencies up to this point.
That straightforward statement including the necessary details may be adequate for the purposes of the prospective lender, depending on the queries they pose.
Just keep in mind that companies are not required to furnish credit references. But most people will. It is doubtful that you would ever be turned down because they are aware that keeping positive working relationships leads to new business.
I hope you now have a better understanding of what a credit reference is! If you are aware that your credit status is difficult, come to Car Nation Canada Direct where we have a team of credit professionals ready to assist you in getting approved for a car loan right away!