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Definition: Credit Reference
Reports verifying past credit records of an individual are Credit References. These may be issued by other individuals, organizations where the concerned individual is employed or banks. Credit references are required while applying for loans, credit cards, rental agreements, etc.
Credit references may also be needed for companies who are conducting business with a new partner for the first time. In this case, the credit references are held as proof of good faith, that the company is a reputed client of the organization. Credit references are sometimes also in form-based formats. Thus, eliminating the need for credit reference letters.
Currently the trend is towards outsourcing the credit reference checking process. Since it is a tedious process to verify the details provided by the applicant, these mundane tasks are given to Credit Bureaus. Credit Bureaus collect and compile data regarding solvency, character and reputation of individuals or businesses and provide the report to the subscriber. These organizations are regulated by Fair Credit Reporting Act of 1970, in U.S.