What is a credit reference & why would you need one?

Whenever a person goes through a credit check or inquiry, they typically need to share information about their ability to manage and pay back debt—also known as creditworthiness. But how can someone prove their creditworthiness? That’s where credit references come in. 

A credit reference helps detail a person’s credit history. Credit reports are examples. In some cases, credit references can also be statements or letters. 

What you’ll learn:

• The most common types of credit references are credit reports, asset documents and character references. 

• Credit references are often part of the process if you’re applying for a credit card, loan or apartment.

• You could get a credit reference by authorizing a credit check, requesting a copy of your credit report, or asking a previous lender or landlord for a credit reference letter.

A credit reference is a statement or document provided by a creditor, typically a financial institution, detailing an individual’s creditworthiness and financial history. 

Lenders and landlords often use this document to evaluate whether extending credit or entering into a lease agreement with a consumer is risky. It includes information such as the individual’s credit score, payment history and outstanding debts.

Let’s say you’re applying to rent a new apartment. The rental office requests to run a credit check as part of your application. You agree to let them access your credit report. And because you want to have a strong application, you ask your previous landlord for a letter to vouch for your responsible payment history. 

In this example, you have two credit references for the rental application—your credit report and character reference.

There are a few types of credit references. Some common types include credit reports, asset documents and character references. Learn more about what they are, who requests them and where their information comes from:

Credit reports detail a person’s credit history, including the types of debt they have and their payment history. Credit reports are the most common type of credit reference. They’re also the most likely credit reference lenders will accept.

Asset documents list a person’s financial assets. Often, it is potential lenders and investors who require an asset document. Assets could include:

• Bank accounts, like checking and savings accounts

• Investments, like retirement accounts and stocks

Character references are people who are qualified to speak regarding a person’s financial habits. They could include people like previous landlords, employers or lenders. And they can help support other references when borrowers are building credit or repairing it.

People may need a credit reference when they need to show their creditworthiness for: 

• Credit card applications

• Loan applications

• Rental applications

Some utility companies and employers may also request credit references.

Lenders, employers, utility companies and other entities may request a credit reference after getting your permission. You may also obtain a credit reference for yourself by getting a copy of your credit reports or asking for a character reference letter.

Once lenders have permission, they generally make direct requests to credit bureaus to review an applicant’s credit report. 

Anyone can request free copies of their credit reports by visiting AnnualCreditReport.com. 

Someone who needs a character reference must reach out personally to the relevant person and request a credit reference letter.

A good credit reference could help you build a strong credit application. Monitoring your credit and staying in contact with previous references can be worth it.

Want to easily track your credit? Explore your creditworthiness and find ways you can improve your score with CreditWise from Capital One. Using CreditWise won’t hurt your credit. And best of all, it’s free for everyone.