Receiving the message “Unable to verify credit references” usually occurs when application of credit is denied.
It is required by federal law when the applicant is issued an adverse action notice which states the specific reason for the denial.
Typically, the reason is the result of either:
- the credit issuer being unsatisfied with the credit references provided to them, or
- the consumer not having enough past creditors in their credit file.
It’s worth contacting the credit issuer to determine the cause of the issue if the reasoning is unclear.
Ask if additional references are necessary or whether they experienced any difficulties in verifying the references you provided.
Ensure that your credit references are aware that they may be contacted, and that you have double checked that their contact information is correct.
In any case, if the credit issuer has been unable to verify your credit references, it may simply mean that you need to build more of a credit history.
Why do I need to provide additional credit references?
The credit issuer may require additional credit references from you simply because you have no credit history or are just in the early stages of establishing one, and you are therefore considerer as higher risk of non-repayments.
You have little to no entries in your credit history for a potential creditor to check.
This places you in a catch-22 scenario where you are unable to establish credit history as a result of financial institutions denying you credit in the first place, much like applying for a job fresh out of college without any experience, yet the position requires it.
In order to kick start a lack of credit history, your potential credit will most likely require you to provide additional references, such a landlord or an employer.
What are acceptable credit references?
A credit reference can be anyone you’ve had a financial association with, the specifics of which will be solely dependent on the requirements of your potential creditor.
For instance, they may or may not accept family members or friends as credit references, and if they do, you may only be able to provide one.
Any additional references will need to be more of a professional and financial nature, such as current or former landlords, which are usually acceptable.
If you’ve always paid your rent on time and without issue, it will increase your creditworthiness with the potential creditor.
It indicates to them your ability to pay consistently and therefore consider you as less of a risk.
Other potential credit references include:
- Financial institutions: This includes banks, credit unions, etc. Obviously, if you’ve had credit cards in the past, showing your ability to pay down your debt is a surefire way of proving your creditworthiness.
- Current or previous employers: Employers can demonstrate your ability to perform tasks consistently and reliably, providing potential creditors the peace of mind that you will pay on time.
- Job hires: Perhaps you’ve hired someone in the past to do a job for you, and you paid them on time.
- Bills: Having a good history in paying your electricity or Internet/cell bills for example is a good example of consistent payments.
In any case, it will be worthwhile determining specifically what your potential creditor will accept as credit references.
Beware though that if the creditor is unable to contact a prospective reference due to an incorrect phone number, a busy dial tone, or the the call being ignored, it may result in your credit application being denied.
What happens if you don’t have a credit reference?
If you don’t have enough credit references to satisfy the creditor, you might need to invest a little time building some credit history.
Obtain secured credit
One possible way to do this would be to acquire a secured credit card, one that is backed by collateral, such as a boat or a car.
This lowers the risk to the lender, particularly in cases where you become delinquent in payments, since they are then able mitigate any risk by possessing the secured asset.
If you are confident in your ability to pay, this is one option, since the secured credit will generally be associated with lower rates than unsecured credit.
Get a consumer finance loan
Probably one that is recommended as a last resort would be getting a consumer finance loan, such as a payday or a title loan, to build up some credit history.
Typically for consumers with a bad credit history, consumer finance loans are usually associated with a very high interest rate, payment affordability and ease of approval.
It is not the best solution, since it may impact your credit score negatively by virtue of the fact that it is a consumer finance loan.
However, so long as payments are made on time consistently, any negative impact should be outweighed and increase your creditworthiness.
Once you’ve established some sort of credit history, any future applications for credit may prove to be more fruitful from a credit reference standpoint.
At that point, you may wish to get rid of any consumer finance loans and apply for more traditional credit offerings.