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A Guide to Credit Reference

A credit reference is a person or piece of information that can vouch for your creditworthiness, allowing a company or financial institution to better judge the risk associated with a loan.  They can be very important to your financial security, so you’ll want to make sure they’re well vetted and flattering to you before passing them along.  Let’s consider in more depth what they are, where to find one, and how to make the most of it as a tool for improving your chances at securing the funds you need.

What They Are

Credit references aren’t only vetted by you – the institution you’re dealing with will have guidelines for who can qualify as one, and will probably weight their opinion against their own analysis.  That is, a reference they judge to be very trustworthy will be given more consideration.  So your best strategy is to find someone – or some piece of information – that both shows you in a good light and reveals strong ties.

Where to Find One

Your reference can be a person, but you can also present documents relating to past successful business ventures: bank statements, investment portfolios, even college diplomas.  Anything that demonstrates you to be someone who follows through on their commitments is valuable to you in your search for the right loan.

A past employer can be a good bet, but not the best: they’re not informed to speak about many aspects of your financial life, but they can vouch for your character and dependability.  It’s even better if you have a past lender who can vouch for your reliable repayment schedule – and it’s still better if you have the loan documents to back them up.

In a pinch, a friend, family member, or coworker can also work as a reference, but remember that the closer their relationship to you, the less weight will be given to their opinion.  So if you can possibly avoid using your mother, it’d probably work out better.

How to Make the Most of It

A bank’s decision takes time and effort, and it’s in no one’s interest for too much time to go by before you get your hands on the capital you need.  So make sure you get it right the first time by securing the strongest credit references you can, and backing them up with as much supporting documentation as you can find.  In these kinds of situations, more really is more, so try to go overboard with the amount of information you give them.  If you give too little, you’ll have to start all over again, and your venture will deprecate in the meanwhile.

Conclusion

Before applying for a loan, make sure you have a strong roster of credit references you can depend on – because they’re the ones that will make a difference to your financial future.  Remember, they see only what you can show them, so try to show them as much as you can, so they know that you’re someone they can trust.