What is a Credit Reference?

A credit reference is a person's prior borrowing history, used as proof of creditworthiness in a credit application. Credit references are a common component of the credit applications of creditors and lenders. A credit reference can be a simple statement of contact information, which is used to contact an individual or business for a verbal reference; it can also be in the form of a letter, in which someone attests to the creditworthiness of the person or business in question.

When is a Credit Reference Needed?

Credit references are more likely to be used when someone is applying for a substantial amount of credit, which is when the creditor or lender wants to spend more time exploring every aspect of the person's repayment history. This is likely to be the case when you are applying for a mortgage, car loan, or apartment lease. It may also be necessary when you are applying for a job in which you are expected to be handling a large amount of money (such as a bank teller).

Credit Reports

A more formal version of a credit reference is a credit report, which is compiled by a third party credit reporting agency that specializes in such information, such as Experian, Equifax, and TransUnion. A good credit report for an individual typically is considered to be one with a credit score of at least 700. Anyone who intends to borrow funds should first check their credit report to see if any issues should be resolved first.