What Is a Credit Reference?

What Is a Credit Reference?

If you're looking to borrow money or rent an apartment, typically, you'll need a credit reference. Credit references demonstrate an applicant's ability to make timely payments.

What Is a Credit Reference?

Credit references are documents that indicate your creditworthiness to potential lenders or landlords. Although the most common type of credit reference is your credit history records, there are other options to prove your creditworthiness to potential lenders.

Credit references provide insight into your borrowing ability and whether you can repay future loans. In addition, it also includes information about your current debt situation.

For example, suppose your credit score is good, and you have a record of timely payments. In that case, the lender will probably accept your loan application. In contrast, having a history of falling behind on debt payments and a poor credit score would likely reject your application.

Types of Credit References

There are different types of credit references, each with varying degrees of effectiveness. Here are some credit references to know about:

Credit Report

Credit reports are the most popular of all credit references. Generally, employers, lenders, and landlords use credit reports to check your creditworthiness and financial standing.

While evaluating your credit history, potential lenders consider your account's age, the number of credit inquiries, and current debt level.

You'll probably face rejection if you have a poor credit score, many credit inquiries, or a large debt.

Credit reports can be helpful since they contain your debt and payment history information. Remember, you can get a free copy of your credit report each year from the three major credit reporting bureaus by visiting AnnualCreditReport.com.

Asset Documentation

Asset documentation is another type of credit reference issued by financial institutions. Typically, the documents list your assets, such as savings accounts, stocks, bonds, or retirement funds.

Having assets can increase your creditworthiness as it shows you can pay off your debts in the future.

Character Reference

A character reference is a credit reference obtained from a previous lender, landlord, or employer. It is a document through which your past lender, landlord, or employer can vouch for your character, integrity, and ability to pay off future debts.

A character reference letter is beneficial if you are new to the U.S. or have zero credit history. For example, suppose you've paid off your past loans on time. In that case, you can have your previous lender vouch for you, thus improving your creditworthiness.

Although character references are not an actual reflection of your financial condition or a foolproof credit reference, they can be an effective way to showcase your finances. They can improve your chances of getting a loan or renting an apartment.

Who Needs a Credit Reference?

You might need credit reference in the following situations:

  • Loan applications: When applying for a personal loan, you need to provide a credit reference to the lender. The credit reference will help the lender evaluate your financial standing and check your ability to repay future loans.
  • Rental applications: When applying to rent an apartment or home, your potential landlord may ask that you provide a credit reference. A bad credit score might require you to make a hefty security deposit or get a co-signor to get the apartment.
  • Utility services: Utility providers for things like electricity, water, phone, and gas to check credit references before activating service. They do so to determine your likelihood of making timely payments.


Good credit references can help you get a loan or rent an apartment. In addition, you can get better rates and terms based on your credit score. Also, a good credit score enables you to get utility services without paying a hefty security deposit.

An excellent credit reference can also give you more choices regarding where to get a loan or rent a place. It can also get you insurance at lower rates since most states allow insurance companies to use credit scores to determine their rates.