What is a Trade Reference?

4 min read

Executive Summary

A trade reference is a source that provides past payment experiences between a business and a vendor. This report tends to include information about how long the account has been open, the account’s credit limit and the business’s payment history with the vendor. An exemplary trade reference, if accepted and verified by credit rating agencies, may positively influence your business credit score. However, the process to obtain good trade reference is time consuming and there are other more efficient and immediate steps you can take to improve your business credit score.

What is a Trade Reference?

According to Dun & Bradstreet, a trade reference is “a source that supplies past payment experience(s) between a business and a vendor.” The payment experience or payment information tends to be about how long an account has been open, the account’s credit limit, and payment history. Dun & Bradstreet offered the following seven base variables as information to be gathered from the source:

  1. Reporting date or as-of-date 
  2. Manner of payment
  3. Rolling 12-month high credit (Highest amount of credit used)
  4. Current total amount owing
  5. Current total past due
  6. Selling terms 
  7. Date of last sale 

Conventional commercial credit reporting agencies such as Dun & Bradstreet, Experian, and Equifax use the information provided to build a more accurate business credit report and profile. Due to the nature of the information, suppliers can submit positive or negative payment experiences. Trade references that are verified and deemed acceptable may impact a business’s credit score and ratings. 

Trade references are not accepted from companies that already report information to these agencies. This includes banks, credit card companies, and businesses legally related to your company. Additionally, the source of a trade reference must be of sound repute and cannot be from companies that have requested anonymity, have no business credit file of their own or have been proven to be untrustworthy. 

How do I build good trade references?

In order to obtain a trade reference, you need to have had trade credit with a company you purchased goods or services from. The most common is a payment term known as Net 30. This is a short term of credit that the vendor has extended to the buyer where the buyer is expected to make payment in full within 30 days of the invoice date. Generally, businesses may offer a range of payment terms, but this ultimately depends on the existing relationship between supplier and customer. For instance, a supplier may request for upfront payment or Net 10 days from brand new clients and/or companies whose time in business is less than 2 years. Conversely, longer terms, such as Net 120 or longer, are offered to established businesses with a good track record of timely payments.

What are the pros and cons?

Trade references are one source of information that can be used to help improve your business credit score.  By demonstrating a business’s longstanding and timely payment history, a good trade reference acts as proof of the business’s financial responsibility. 

However, it does take a long time to build up good trade references. Just like any healthy relationship, it takes a while to lay down the foundation of trust. Business relationships between a supplier and buyer typically must exist for some time before the former is willing to offer the latter longer payment terms. Moreover, enough time must have lapsed to demonstrate a longstanding payment history between the two parties and showcase your business’s creditworthiness.

Furthermore, credit agencies only receive trade references from a small list of companies. This means that most B2B activity will not be recorded in their database. This has implications for small businesses as often the documented credit history appears far less robust than it actually is. 

Please note that because some vendors are willing to make positive trade references in exchange for money, some modern lenders and underwriters are increasingly discounting positive trade references and shifting their risk assessment models to focus on other underwriting data.


Trade references can be an important part of a good traditional credit score, but in light of the time and effort it takes to obtain them, and often their diminished value in the eyes of creditors, we do not recommend focusing too much on them. While exemplary Trade References can be an asset and manually submitted to credit reporting agencies for their consideration, it is only one of the many other factors that will impact your business credit score. If your main goal is to improve your business credit score, there are more efficient and reliable ways of doing so. 
As good practice, it is important to stay updated on your business credit score. With our free-to-use Tillful app, you will have unfettered access to your business credit score updated in real time. By knowing what’s behind the number, you are able to focus your efforts where it counts and take the immediate steps to improve your business credit score and get the credit you need to grow your business.

About the author

Dexter Lam

Written by Dexter Lam

The Tillful team is writing articles to help companies grow their credit and improve their business financial health. If there’s a topic you’d be interested in learning about, let us know at contact@tillful.com.

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