Definition of a Credit Reference?

A good credit reference can help landlords decide whether to extend a lease to you, but a bad one might result in the landlord rejecting your application. Let’s take an in-depth look at this important concept and see how it works exactly.

What is a credit reference?

A credit reference is a document that can provide information about whether you typically have paid your bills on time. A credit reference provides information that helps a landlord decide whether to extend a lease to you.

For example, if you have an excellent record of paying your bills on time and there are no recent late payments, the landlord may be more likely to offer you the lease. 

On the other hand, if you have an average or poor history of paying bills on time and it’s been two years since your last late payment, the landlord may be less likely to extend the lease.

Landlords can ask for more than just your employment and income details. Usually, they also ask questions about your financial history, including any bankruptcies or judgments against you, if any. Landlords use this information when deciding how much of the deposit they need from you or how much rent they can charge each month. 

If there are negative items on your rental application, it’s possible that the landlord will require more documentation before approving the application and issuing an offer letter.

How Do Landlords Check Credit References?

Typically, landlords will check your credit history before extending you an apartment lease. This is because landlords have many other things to worry about when renting out an apartment and don’t want the responsibility of having to deal with late payments or missed rent. 

1. If you’re applying for an apartment rental, the landlord will typically ask for a copy of your last three months’ worth of bank statements, as well as your credit report. This is so that they can see if you have had any overdrafts or bounced checks in recent months. 
2. The landlord may also require proof of employment and proof of income. 
3. Landlords can also hire companies to conduct criminal background checks on prospective tenants, which may come up on your credit report. 
4. Tenants should always disclose their current address and phone number on the application form, as this helps the landlord verify the information provided. 
5. Landlords are legally required to do all of this due diligence on applicants because it protects them from liability should a tenant not pay their rent at all or be evicted from the property for failing to maintain it properly. 
6. Finally, tenants should remember that if they do sign up for an apartment lease, once agreed upon, there is no cancellation policy whatsoever, regardless of how much notice you give them.

What Does a Credit Reference Report Include?

A credit reference report includes information about your credit history, such as: 

• The type of loans you have applied for and been approved for in the past; 
• How many times you have missed payments in the past; 
• How much of your credit limit has been used; 
• If any late payments are on your report; 
• The number and total balance of your accounts.

How Often Are Credit Checks Done by Landlords?

A landlord is likely to do credit history checks on you before they will approve you for a lease. 

These checks are done through one or more of the following: your credit score, your credit report, and your previous landlords. 

Landlords want tenants who are dependable and able to pay their rent each month. Landlords can request your credit score from one or more major credit bureaus. Your credit score shows how well you’ve been managing and paying off debts in the past six months.

When Can Landlords Ask for Your Credit References?

Landlords can ask for your credit references when you fill out an application for a rental property. Landlords might also ask about your credit history if you are already renting from them. If you are applying for a mortgage, the lender will typically be checking your credit history as well. Credit references are usually financial institutions like banks or credit card companies that have information about whether or not you have paid your bills on time.

Main Types of Credit References

Checking your credit report or reviewing your credit score are two ways to find out what type of reference you have. Some of the most common types of references are: 

• Personal references 

These are people who know you and can vouch for your character. They can be people you know in person, like friends and family members, or people who may not know you personally but are aware of your reputation. 

• Professional references 

These are people who know about your work history, such as past employers or coworkers. 

• Financial references 

These provide information about whether you have been able to keep up with payments on time, such as utility companies and landlords. 

• Credit references 

These references provide information about whether you typically pay your bills on time. 

It’s important to check what type of reference you have before applying for a new rental property. If you’re having trouble paying back debts, it will be hard to secure rental housing because many landlords require their tenants to show proof they can afford their monthly rent. It’s important to do some research and understand how credit references affect your potential move.

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