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A credit reference refers to a party that an individual or business has a financial link to. These links are parties that have firsthand knowledge of a person's or business’ financial history. Credit references are usually documented in personalized files known as credit reports, which are primarily used to determine a person’s creditworthiness.
When a person gets a loan, signs a lease, or applies for something on credit, she can develop a credit reference. This refers to the companies that she owes or once owed. Credit references are generally maintained by credit bureaus and credit agencies. These companies maintain credit reports for individuals and businesses, which note the details of the relationship between the debtor and her credit references.
The name and contact details of the credit reference are commonly noted. The amount of credit extended and the amount that remains outstanding are often outlined. Additionally, there is usually an indication of how the debtor has fared in making scheduled payments. If, for example, she has stopped paying on a loan, it may be noted that the account has been sent to a collections agency.
When a person seeks further credit, it is likely the creditor will want to check her past credit references. Potential creditors can do this by ordering a credit report. This usually plays a large role in deciding whether or not to issue credit. Both individuals and companies can be subject to the same processes.
If a person wants to analyze her credit references, she can request a credit report from companies that provide them to third parties. Doing so may involve paying a fee. In many cases, however, people are entitled to free credit reports periodically.
Credit is an important part of life for many people. Since the information contained in a credit report can affect a person’s access to credit, it is important for that information to be correct. If a person disagrees with any of the information regarding a credit reference, she can dispute it. The company that issued the report is generally required to try to solve the problem. If it is found that the information is incorrect, a person usually has the right to have it corrected.
Credit references may have an effect on things other than obtaining future credit. These details may determine whether or not a person qualifies for certain employment. It can also affect where a person lives. People with poor credit references are often barred from living in certain places, even when they have the money to pay.