880 Walkers Line, Burlington, ON, L7N 2G2
My Garage

What is a Credit Reference & Do You Need One?

What is a Credit Reference & Do You Need One?

Credit references are gradually becoming more prevalent in our lives. However, what exactly is a credit reference and should you give one?


What is a Credit Reference?


A personal or professional reference is required during a job application; a credit reference is the same idea. 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 your financing a car loan. 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 was already noted, the prospective lender probably has specific inquiries they want answered. Make sure those are mentioned in any credit references you offer.


Typical credit references ought to contain:

  • Information about the organization's accounts and the nature of the connection
  • The duration of that connection
  • An overview of your payment history, including any late payments, and a list of payments you've made in the past
  • Any identifying characteristics to connect you to those accounts
  • Your credit usage, payment, and request amounts
  • Any current unpaid obligations owed to the organization Exact responses to all inquiries from the potential lender


elements of a credit reference


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 instance:


(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 where we have a team of credit professionals ready to assist you in getting approved for a car loan right away!

Categories: Uncategorised