Credit reference
Encyclopedia
A credit reference is information, the name of an individual, or the name of an organization that can provide details about an individual's past track record with credit
. Credit rating agencies provide credit references for companies while credit bureau
s provide credit references for individuals
.
Other letters of credit reference might be written by bank
s which would provide basic information about how long the applicant has held an account
, what type of account it was, and whether or not there were any overdraft
s or late payments noted.
of lending to a given applicant, or to determine overall creditworthiness. For example, if an applicant's credit history indicates proper, timely payments on all outstanding obligations, a lender may judge it more likely that the applicant will make timely payments on the requested loan
.
Credit (finance)
Credit is the trust which allows one party to provide resources to another party where that second party does not reimburse the first party immediately , but instead arranges either to repay or return those resources at a later date. The resources provided may be financial Credit is the trust...
. Credit rating agencies provide credit references for companies while credit bureau
Credit bureau
A credit bureau , or credit reference agency is a company that collects information from various sources and provides consumer credit information on individual consumers for a variety of uses. It is an organization providing information on individuals' borrowing and bill paying habits...
s provide credit references for individuals
Consumer credit risk
The following article is based on UK market, other countries may differ.Consumer Credit Risk is the risk of loss due to a customer's non re-payment on a consumer credit product, such as a mortgage, unsecured personal loan, credit card, overdraft etc .-Consumer Credit Risk...
.
Other letters of credit reference might be written by bank
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
s which would provide basic information about how long the applicant has held an account
Account
Accounting is a systematic way to record transactions.An Account refers to assets, liabilities, income, expenses, and equity, as represented by individual ledger pages, to which changes in value are chronologically recorded with debit and credit entries. These entries, referred to as postings,...
, what type of account it was, and whether or not there were any overdraft
Overdraft
An overdraft occurs when money is withdrawn from a bank account and the available balance goes below zero. In this situation the account is said to be "overdrawn". If there is a prior agreement with the account provider for an overdraft, and the amount overdrawn is within the authorized overdraft...
s or late payments noted.
How credit references are used
Credit references are used to help lenders quantify the riskCredit risk
Credit risk is an investor's risk of loss arising from a borrower who does not make payments as promised. Such an event is called a default. Other terms for credit risk are default risk and counterparty risk....
of lending to a given applicant, or to determine overall creditworthiness. For example, if an applicant's credit history indicates proper, timely payments on all outstanding obligations, a lender may judge it more likely that the applicant will make timely payments on the requested loan
Loan
A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower....
.
See also
- CreditCredit (finance)Credit is the trust which allows one party to provide resources to another party where that second party does not reimburse the first party immediately , but instead arranges either to repay or return those resources at a later date. The resources provided may be financial Credit is the trust...
- Credit riskCredit riskCredit risk is an investor's risk of loss arising from a borrower who does not make payments as promised. Such an event is called a default. Other terms for credit risk are default risk and counterparty risk....
- Consumer credit riskConsumer credit riskThe following article is based on UK market, other countries may differ.Consumer Credit Risk is the risk of loss due to a customer's non re-payment on a consumer credit product, such as a mortgage, unsecured personal loan, credit card, overdraft etc .-Consumer Credit Risk...
- Default (finance)Default (finance)In finance, default occurs when a debtor has not met his or her legal obligations according to the debt contract, e.g. has not made a scheduled payment, or has violated a loan covenant of the debt contract. A default is the failure to pay back a loan. Default may occur if the debtor is either...
- ReferenceReferenceReference is derived from Middle English referren, from Middle French rèférer, from Latin referre, "to carry back", formed from the prefix re- and ferre, "to bear"...
- Credit scoreCredit scoreA credit score is a numerical expression based on a statistical analysis of a person's credit files, to represent the creditworthiness of that person...