Service providers don’t know if you will pay your bills early enough when you are a new customer with a supplier, lender, and utility provider. Henceforth, they are at risk of giving you anything on credit. Therefore, having a credit reference letter might assist you in convincing them to offer you more favorable conditions on the loan/service you are asking for. Here we will see the Credit reference letter and how to write it.
Credit reference letter: what is it?
A credit reference letter is a piece of document verifying a potential borrower’s creditworthiness. It is a letter from a financial institution or bank with whom a person or organization has been banking for some time proving that the person or organization has a good credit record.
It gives assurance to the third party involved that the person or organization pays back his loan promptly and is trustworthy. A set time is given in the credit reference letter which must be accepted and agreed upon by the person and Organization asking for the loan.
A credit letter is also a written document by the 3rd party, given out to ensure compliance as towards payment of services rendered and goods bought when acceptable documentation is provided by the seller.
Financial institutions such as banks, and in some situations insurance companies and mutual funds may provide these letters. If the customer is not able to pay the seller, the third party which is the financial institution that issued the credit reference letter will make the payment on the buyer’s behalf.
Credit reference letters are mainly instructions, therefore fundamental details ought to be included. Details of the
- Seller and buyer
- The receiving bank
- The amount to be transferred
- List of terms and conditions
- Requirement of the seller
- Time range of when the letter is written and its expiring date.
Where and when is a credit reference letter needed?
The credit reference letter is needed when one is about to begin an establishment in a foreign country, The person asks for credit reference letters from a financial institution (Bank) with whom the person has been banking as proof that he is credit trustworthy.
Doing this enables the financial institution to have faith and confidence that the loan would be refunded on time.
The credit reference letter is also needed when collecting money from a person, financial firm, bank, or making an investment in an organization.
It is also needed when you are unfamiliar with a supplying industry, any failure to print one means paying in advance for each business transaction.
Format for writing a credit reference letter
Format One: In response to your request for a credit reference of (Name of the customer), we are therefore writing to report in full detail the credit history of our customer. Our documents cover the former credit transaction and his expertise in handling loans given to him. Henceforth, we recommend (the name of the person) to be given the financial opportunity following the range of his capacity.
Format Two: You inquired about Mr. and Mrs. Augustine. Within the stamped envelope are the copies of their credit history banking with us. Please show secrecy when working with them.
Mr. and Mrs. Augustine were ranked amongst the superior clients of ours. Over two years ago, their history weakened to the extent that their accounts are operating at least ninety days after consequently that we have told them that their next transaction would be paid with cash only.
Format Three: We are glad to release the information regarding Mr. and Mrs. Augustine’s credit account. The duo has shown reliability over the past 15years, with little exceptions, has paid their financial obligations appropriately. We view their account as a beneficiary and are certain they will be a trustworthy client for your organization.
Format Four: We are pleased to release to your company the report of Stephen Joe’s credit history. Mr. Stephen has been a notable client and a wonderful credit risk. Over 4yrs of banking with us, he has always paid off his balances early. Enclosed is a private summarization of his account over the past eighteen months, as proof to you. With any further questions, please reach out to us via our phone access: 4448_1325
Format Five: Enclosed within is a summarization of the credit history of Rachel’s credit reference, requested. Please respect the secrecy of our customer’s information. It feels bad that Ms. Rachel cannot be recommended as a good credit risk. She has over declined in payments and has exceeded her credit limit many times, as shown in the summary. In the case of further questions, please call 4448_1005.
Sentences to use when writing your Credit reference letter
- When stating the purpose of the letter, mentioning the customer’s name and its confidentiality, when necessary. You can use the following sentences:
I am happy to provide the credit history of Mrs. Jane, enclosed within.
Enclosed is the credit account, requested by you of Mr. Rogers on the 10th of April. We are certain that you will apply discretion regarding this information.
In response to your inquiry concerning the financial statement of Mr. Rogers’s credit history banking with us, I can say that Your credit applicant Mr. Rogers has been our Client for 3 years and we are delighted in helping in the evaluation of Mr. Rogers, your credit applicant.
- Given the requested statement. Appropriately, serves as a reference to any report you may have enclosed in your reference. You can then make a reference either in the positive or negative sense, according to the information gathered about the customer. Using these sentences:
- We are pleased to say Mr. John is fit for the loan.
- We feel regret to say Mrs. Jessica is not a good credit risk.
Letters written to the Banks
These are letters sent particularly to the banks by their customers. Based on the situation at hand, the letter can be addressed to an important bank official or Manager.
There are several reasons why you might want to write a credit reference letter to the bank. The reasons inclusive are:
- To ask for an ATM card
- To request for money transfer
- To close or open a bank account.
- A change in the phone number and postal address.
However, you must take note, to always present the letters to the bank’s professional. You need to ensure that all the information the bank requires concerning your account is provided before writing your letters.
Use formal business greetings. Write the recipient’s name, if you know it. Include the aim of the letter. Relevant information such as the postal and email address, account details, as registered with the financial institution is stated.
Don’t write the same thing twice, avoid repetition. You have to keep the letter concise and straight to the point. Then finally wrap it up by calling the recipient to immediately respond.
A Sample of a credit reference letter for a Client
A Credit reference Letter might be difficult if you are unable to write a positive reference. Your response should be formal, polite, and show courtesy.
Do not write based on your emotions but the truth, do not draw attention to the errors made on the account of the customer with the problem but remove the mistake at the start and end of the letter.
Explain the aim of the letter and the name of the customer is to be provided and kept confidential. Give out the information requested by the person.
(The name of the sender)
(State and phone contact)
(State, Phone Contact)
(Topic: Bold, a summary of the content of the letter), this is Optional.
Dear ( Receiver’s Name),
This letter is a response to your inquiry about Mrs. Jane’s credit history. Of the truth, she has a good financial record with us, and the credit loan she is applying for can be granted to her.
Enclosed are some of the monetary transactions she has done with us, and she has seen to the fulfillment of her financial duty, satisfactory to us.
(Name of sender (Title of the sender)_which is optional.
Sample two of a credit reference letter
This sample permits you to record your customer’s history before giving them credit terms with your company. This letter, unlike the others, collects information about their total history including how long the account has been functional, any late payment, current balance, and high credit limit.
(The Company’s name)
(To) Company’s name
The mailing address
(The Applicant’s name)
Our (Company’s name) has received a request for a credit transaction from (the Applicant’s name)who has nominated you as the credit reference.
Please endeavor to answer the questions below to help us in deciding the credit application.
How long has the applicant opened the account?
What is the limit of credit?
What is the current balance?
What is the number of late payments?
All the information relayed to us will be kept private. Please, do return this letter to (The business name) before (the date) inside the enclosed envelope.
Above are some samples you can use for a credit reference letter. Please note the format used, where it is needed, the sentences to use, e.t.c. All these things would be required to determine the financial worthiness of a potential borrower.