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. Here are several situations in which a credit reference is more likely to be requested:

Applying for a loan or credit. When you apply for personal or business loans, credit cards, or mortgages, lenders usually ask for credit references to determine your ability to repay the debt.
Renting a property. Landlords often request a credit reference or run a credit check to assess whether a potential tenant is financially reliable and can make regular rent payments.
Opening utility accounts. Utility companies (e.g., for electricity, gas, water) may ask for a credit reference or conduct a credit check to decide if a deposit is required for new accounts.
Leasing a vehicle. When leasing a car, leasing companies may ask for credit references to confirm the applicant's financial reliability.
Applying for business credit. When a business seeks to open a line of credit with suppliers or financial institutions, a credit reference or business credit check is typically needed.
Employment background checks (for financial roles). Some employers, especially in financial or high-responsibility roles, may require a credit reference to ensure the candidate is financially responsible.
Getting insurance. Insurance providers may ask for credit information to assess risk levels when issuing policies, especially for home or auto insurance.

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.