When you submit your rental application, you want to make sure you stand out as a quality tenant. One of the ways you can showcase the positive aspects of your application is by adding a credit reference. Not only can a credit reference attest to your creditworthiness as a renter, but it can also give a potential landlord additional information about you.
In this Redfin article, we’ll explain what a credit reference is and what to include in it when submitting your rental application. Whether you’re renting a home in Dallas or an apartment in Orlando, find out how you can make your application the best it can be.
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What is a credit reference?
A credit reference is a document that attests to the creditworthiness of an applicant. The letters can come from a variety of sources, but their goal is the same — to provide detailed information proving you make on-time payments when bills are due.
When applying for a rental, the landlord or property management company may already have reference requirements in place. If they don’t, you can consider offering these supplementary materials. Just make sure to choose credit references who will speak positively about your credit history.
If you don’t have a strong credit history or you have outstanding debt, credit references can double as character references or employment references. Both can help show you’re a responsible tenant.
When do you need credit references?
Since credit references can expand on your payment history, and demonstrate your likelihood of making timely payments, there are a few scenarios you may want to use them. This can include applying for a loan or opening a new credit card. Of course, they can also be a key piece in the rental application process.
These references not only shed light on an applicant’s credit history but also help landlords get an idea of your creditworthiness and whether you’re likely to pay rent on time.
Can they replace credit reports?
Credit scores are the most concise way for landlords to get an idea of your payment history and whether you’re missing payments, like from previous leases or other debts. However, credit scores don’t have additional details, just facts.
Credit reports come from the three main credit bureaus, TransUnion, Equifax, and Experian. There’s no character reference attached to your credit score, and credit reports often leave out information about extenuating circumstances that led to you making a late payment.
As a result, credit references can help fill in the blanks. They provide the specifics that can help a landlord understand what happened. For example, if you have a ding on your credit report for not paying a month’s rent on time, but your check got lost in the mail, a letter from your previous landlord could clear that all up.
Most landlords will still want to see a credit report, so think of your credit references as a supplement rather than a replacement.
How to choose credit references
When choosing credit references, it’s important to ask people who will speak positively about your credit history. Choices might include:
- A previous landlord
- Utility companies
- An employer
- Financial institutions or any previous lenders
Poor references might include:
- A family member or friend
- A former boss you haven’t spoken to in years
- An ex-spouse
A previous landlord could also be a bad credit reference if you had any issues with them. This includes issues with payments, but also just getting along in general.
Friends and family members will most likely say good things about you, but because of their personal connection to you, won’t always be considered a reliable choice. Although friends and family are great to ask, they won’t carry as much weight as an employer, coworker, or past landlord.
Character references
If you don’t have a credit history and need someone to provide a character reference, you may instinctively go to your friends and family. If possible, reach out to a coworker, neighbor, or even someone you volunteer with instead. They can offer a more unbiased opinion of your character.
What’s included in a credit reference letter?
When asking people to write credit references for you, let them prepare a letter and that you’ll add in relevant information. Make sure any reference letter has:
- Your name
- Current address
- And email and phone number
Make sure the letter is going to your prospective landlord, so ask whoever is writing it to include your landlord’s name, address, and email. You may even want to send them sample letters to make it easier to write one for you.
If you’re simply responding to a request for credit references by providing a landlord with a list of contacts, make sure each entry has their:
- Name
- Contact information
- Relation to you
For example, if you were listing your current landlord, the entry would look like this:
Mr. Joe Landlord, [email protected], Current Landlord
Other forms of credit reference
There are several different types of credit references that support credit reports and your actual credit score. They don’t necessarily have to be a note written by a specific person. Supporting documents can also add depth to your personal financial situation.
Additional supporting documents include:
- Checking or savings account history
- Public records
- Retirement funds statement
- Pay stubs and/or W-2 forms
Each of these different forms and documents may positively impact your application to a potential landlord. They add greater detail to your credit history that goes beyond a single number. All these documents come together to help establish your creditworthiness.
Financier support documentation
A credit reference may also come in the form of financial support documentation. This type typically comes from a family member or friend who agrees to co-sign your lease agreement or act as a guarantor for your rental payments. This type of reference is particularly helpful if you don’t have strong credit references and are trying to counter negative items in your credit history.
Employment references
Employment references are another type of credit reference used to show that you’re a responsible tenant. A current or previous employer can provide an employment reference, but make their letters include your job title, dates of employment, and salary.
Asset documentation
Asset documentation is a type of credit reference that shows your financial stability, which translates to your ability to pay rent. It includes bank statements, investment account statements, and retirement account statements.
Rental history
Your rental history is another type of credit reference that landlords may check. Your rental history includes information about your previous rentals, such as whether you made your payments on time, how long you stayed in each rental, and whether you left behind any damages.
Utility services references
Utility references help demonstrate your ability to pay bills on time. They include information about your electricity, gas, water, and trash bill payments. Rent is just another bill when you get right down to it, so your pattern of payment with these smaller bills can help influence your creditworthiness for bigger ones.
When in doubt, include a credit reference letter
A credit reference adds depth to that potentially deceiving credit score. Even if your landlord doesn’t request credit references, consider adding in a few to really show who you are as a renter. Ensure they illustrate how responsible you are and how likely you are to pay rent on time. Coming from the right sources, credit references can help your application, and hopefully get you the rental.
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