Do Loan Companies Call Your References?

Applying for a loan often involves a thorough review by lenders, and loan companies may contact personal and professional references as part of this process. This article explores when lenders reach out to references, the information they seek, and how applicants can prepare their references for such interactions.

When References Are Contacted

Loan companies frequently contact references during the application processing phase, typically after the initial submission but before final approval. This practice is more common for certain loan products, such as unsecured personal loans, auto loans, or when an applicant’s credit history is limited or needs further verification. The purpose of these calls is generally to verify information the applicant provided or to gain a broader understanding of their character and reliability.

While not every loan type or every lender will initiate these calls, they serve as a security measure to prevent fraud and confirm the accuracy of submitted details. Lenders may use references to verify an applicant’s identity, employment, and residency details, which can accelerate the application process. These checks are distinct from credit report inquiries, which focus on financial history, as references provide supplementary insights into an applicant’s overall trustworthiness.

Information Sought from References

Loan companies generally seek factual verification or broad character insights from references, rather than detailed financial information. When contacting employment references, lenders may verify specific details such as job title, duration of employment, and salary range. This helps confirm the stability of an applicant’s income and employment, which are important factors in assessing repayment capacity, and ensures the information aligns with their loan application.

Personal references are typically contacted to confirm the relationship with the applicant and to gain a general assessment of their character and reliability. Lenders might inquire about how long the reference has known the applicant and whether they can vouch for their trustworthiness. Additionally, references may be asked to confirm contact information, such as the applicant’s address or phone number, to ensure the provided details are accurate. It is important to note that a reference is not legally responsible for the loan, and their role is solely to provide information.

Preparing Your References

Applicants should proactively inform their references that they might be contacted by a loan company. This ensures references are not caught off guard and can respond appropriately. Providing references with the name of the loan company and the general purpose of the call, such as “to verify employment” or “as a character reference for a loan application,” is beneficial. This context allows references to anticipate the nature of the questions and respond thoughtfully.

It is important to provide accurate and up-to-date contact information for all listed references on the loan application. Lenders typically require full names, addresses, and both personal and work phone numbers; some may also request email addresses. Choosing reliable and communicative references who know the applicant well and can speak positively about their character and responsibility can strengthen a loan application. While references are not guarantors, their input contributes to the lender’s overall assessment of an applicant’s suitability for a loan.