Credit references are documents that verify your credit history. They can come in the form of a credit check report, asset documentation, or character references.
Limited or adverse credit history can potentially impact your rental application. If you have poor payment history, a low score, or little to no history — your chances of getting approved may go down. Landlords or property management companies can approve or deny rental applications based on these references. If this description fits you — don’t fret. There are ways to get a little more creative with credit references.
Rentals are in healthy demand today. So being prepared could give you a leg up if you’re in a competitive market.
General Definition of a Credit Reference
Credit references paint a picture of your borrowing and payment habits and history. Property managers and landlords use it to help determine whether you’re able and willing to pay rent on time and in full.
Documents of financial agreements can be used as a credit reference. They come in the form of credit reports, character references, asset documentation, and credit reference letters. In some cases, letters from personal lenders or documents from a car loan can be used. Be sure to clarify what the landlord needs when applying for an apartment. It’s also helpful to pull together the documents ahead of time, so you can pull together references for multiple apartments at once.
When You Need Credit References
At the end of the day, landlords want to know if you’re able to pay rent. Getting an apartment rental is a business transaction — between two strangers. Credit needed for an apartment plays a key role in rental applications.
Why Landlords Want Credit References
A credit reference is proof of your financial history. They detail how much debt you have, how timely your payments are, and your credit score, among other factors.
For instance, if your credit references show that you’ve been able to pay off your debts in full in a timely manner, a landlord will likely approve your rental forms.
Applicants with less than stellar credit scores or poor payment histories have lower chances of being approved.
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Types of Credit References
As mentioned, credit references come in different forms, like credit reports, character references, or formal letters from bank loan officers.
The most available type is a credit report. Three major credit boroughs provide credit reports: Equifax, Experian and TransUnion. They are the most used credit bureaus and are required to give a free credit report every 12 months. The credit scoring system, FICO, is used in all three, and differs minorly.
Credit reports contain information like your credit history, current debt, bankruptcies and foreclosures. It can also include the age of your debt and how many credit inquiries you’ve had. Importantly, it’ll also contain your credit score, ranging from 350 to 850.
Landlords will look at this report to determine the financial risk of each applicant. Generally speaking, a credit score of 680 or higher is considered acceptable, though requirements may vary based on the lender or circumstances. Another factor that can impact your credit score and report is the number of inquiries into your credit history. If there are a lot of inquiries it can be perceived as a negative detail by lenders because it has the potential to indicate that you may be struggling financially. Some rental applications will include a fee for running the credit check.
Bad or no credit may give a landlord pause — but it may be possible to strengthen your case.
Asset documentation is proof of income, liquid cash, or investments. It shows landlords that you are financially stable and able to handle unforeseen circumstances, like a job loss.
Your landlord may request a verification letter from your employer, pay stubs, or an offer letter to prove income. You may also have to provide documentation of your savings or investment funds like mutual funds or retirement plans. Reach out to your financial institution or brokerage to provide you with documents of your accounts.
The more assets you have, the stronger your application will be.
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Character and Credit Reference Letters
Credit reports and asset documentation only tell part of the story. A character or credit reference letter may give context to a spotty part of your credit history. Someone who you’ve had financial transactions with, such as an employer, previous landlord, or business partner — can write a letter confirming your character and values. For example, if you went through hardship, such as a medical illness, but still met your financial obligations, someone such as a landlord can vouch for you.
If you have bad credit, for example, an institution can demonstrate if you have taken courses, been given resources such as a debt payoff planner, or worked out a new payment plan to successfully pay off your debt. It demonstrates a commitment to improving personal finance.
Don’t be afraid to ask for a reference letter — many may be willing to write on your behalf. Remember, however, that these types of letters are not as concrete as credit and asset reports. They work better as supporting documentation.
Financier Support Letters
If you have troubled credit history, a financier support letter from a cosigner on a lease can help. These letters are typically for business owners who need to prove they have the capital to meet rent or buy.
For a lessee, a guarantor would write a letter with context on how they can support your rent if needed. It’s helpful in case you have an adverse credit history. For business owners, the letters would be obtained from financial institutions or financial partners backing a business lease or purchase.
Credit Reference Examples
If a landlord requests written credit reference letters, have a list of people in mind who can type up a quick letter. You could also ask them to type up a generic letter that you can use across multiple applications. Sometimes a property management company or landlord will have their own template — so be sure to clarify which format is acceptable.
A credit reference letter can be brief. But it must include key details such as:
• Reference full name and contact information
• Length of relationship
• Payment history
Additional details may be requested depending on what your landlord requests. Below is a sample template:
“Dear [Landlord Name]:
I have known Ben as a tenant for three years. He paid rent ahead of time, was quiet, respectful, and took care of our property. Also, he ended his lease in search of a bigger space. He got his deposit returned in full — so he’s highly recommended as a tenant.”
If you do not have a history of renting, you can ask a financial institution to vouch for you. Here’s an example letter:
“[ABC Bank] lent $30,000 to Tina Jones in 2004. She made her payments on time and paid off the loan ahead of schedule in 2007.”
If you’re still short a reference, try an employer to vouch for your stability at your current job:
“Tim has been an employee of ACB Company for 3 years and has been promoted once. Her current salary is $92,000. She’s responsible and puts our clients’ interests first. She will make a great tenant.”
There are even more resources available online such as those offered by Property Club NYC .
How to Secure a Credit or Character Reference Letter
Before you send a mass email to all your contacts…confirm with your landlord what details are needed. If there’s a template letter, that works even better. Once details are confirmed, reach out to your contacts. Be sure to provide them with all the information they need to include in the letter.
There’s no formal process to request a letter from financial institutions. You can go in-person to speak to a banker who can provide you a letter or you can call your bank and ask how to obtain one.
How to Improve the Chances of Getting a Letter
Consider authorizing your institution to release personal information while you are actively applying for rentals. Not doing so could cause delays as the letter goes through the chain of command.
Landlords want to see that you earn income and honor your debts. Credit references are formal documents that support your claim. They come in the form of concrete records from credit bureaus to character reference letters from employers who esteem your character and prove you have sufficient income.
The ways to obtain these records differ by institution. Credit bureaus are required to provide free reports to individuals yearly. Financial institutions can issue letters — but your best bet is calling or visiting in person to discover next steps. Finally, individual reference letters from former landlords or employers are also valid.
If budgeting is not your strong-suit, a money tracker app can help. SoFi’s Insights app tracks all of your bank accounts and debt accounts in one place. You can see how much you spend in different categories, like restaurants and necessities. And, there is credit score reporting at no cost to you. Best of all, it’s free. Download the app to learn more.
What do I put as a credit reference?
That depends. Ask your landlord what documents he or she requires for a reference. It can mean a credit report, bank statements, character reference — or all three.
Who counts as a credit reference?
A credit reference can be someone from a tenant-landlord or business relationship. It can be a representative at a bank who can give a formal written letter of loans or accounts you have with them. It can be a former landlord who can recommend you for being an outstanding tenant. Or, if you have limited or no credit history, a reference can be a current or former employer who can recommend you for strong character.
Why do I need a credit reference?
Most property management agencies or landlords require credit references in order to approve a tenant application. This gives them an idea of your financial history and whether you’ll be able to and willing to pay rent on time.
Photo credit: iStock/damircudic
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