We reveal here the secret code used in bank references - a bank manager’s opinion of their customer’s credit standing written so carefully that few can decipher them.
Bank references pre-date credit reports and were once the only way of checking out the creditworthiness of a consumer. Bank references remain an important way of checking out credit standing’.
To obtain a bank reference on another person or company, you need to ask your bank to make a ‘status enquiry’ on their bankers. This means that you need to know who their bankers are. You can find that from a cheque (if you have a cheque) or by simply asking the other person or company for the details.
Your bank will write to the bankers of the third party and ask for their opinion of the person or company, and whether they are good for an amount (e.g. £5,000) and for a purpose (e.g. trade credit).
A typical bank reference reply might read ‘Respectable and trustworthy, considered good for your figures and purpose’.
That’s where the secret code comes in. Small changes can have a dramatic effect. In short:
‘Respectable’ means all the usual money laundering checks and references were made when the account was opened. Less strong alternatives include ‘Respectably introduced’, and the weakest is if you don’t see the word ‘Respectable’ at all.
‘Trustworthy’ means that the customer usually only issues cheques when there is a reasonable chance that there are funds behind them, and also that if a customer has said they will pay in regular instalments, they will do so. Omission means the opposite.
‘Considered good’ means pretty much ‘undoubted’. ‘Should prove good’ means the customer is under pressure but hasn’t made a mess of his or her finances before so should be OK. ‘We do not think he would enter a commitment he could not see his way clear to fulfil’ means pretty much the opposite. There’s a real risk of default, the bank just isn’t saying it in so many words.
Look out also for ‘The bank has a debenture’. If the bank has one, it has to tell you in any bank reference for a company. If it has one, it can pull the rug at any time and you’ll have little chance of recovering your money if things go wrong.