What is a credit reference?

A credit reference is a statement about your creditworthiness, provided by a lender, creditor, or other entity who has extended you credit in the past. It essentially serves as a testimonial regarding your reliability in managing debt.

• Purpose: The primary purpose of a credit reference is to provide potential lenders or creditors with an assessment of your credit history. This helps them evaluate the risk involved in extending credit to you.

• Contents: A typical credit reference includes information such as:

  • Your payment history (on-time vs. late payments)
  • The amount of credit extended to you
  • The length of time you've been a customer
  • The current status of your account (open, closed, active, delinquent)

• Who Provides Them: Credit references can be provided by banks, credit card companies, mortgage lenders, and even landlords (especially regarding rent payments). Utility companies may also be contacted for a credit check.

• How They're Used: Prospective landlords, employers (in some cases), and other entities might request a credit reference as part of their evaluation process. Lenders use them extensively when you apply for loans, credit cards, or mortgages.

• Obtaining a Credit Reference: You usually cannot directly request a credit reference for yourself. Instead, the lender or entity evaluating your creditworthiness will contact the previous lender/creditor directly to request it. However, you can request a copy of your own credit report from credit reporting agencies like Experian, Equifax, and TransUnion, which contains similar information.

• Importance: A good credit reference can significantly improve your chances of being approved for credit or other opportunities that require demonstrating financial responsibility. Conversely, a negative credit reference (due to late payments or defaults) can negatively impact your ability to obtain credit in the future.