What it covers
Identity, credit history, and the affordability picture against the rent you are asking. Guarantors can be referenced on the same basis, which matters because a guarantee from someone who cannot pay is not a guarantee.
Why credit-backed
A reference that relies on documents the applicant supplies is only as honest as the applicant. A regulated credit reference agency is checking against records the applicant does not control.
What it does not do
It does not make the decision for you and it is not a guarantee of future behaviour. It tells you what the record says, which is a great deal better than a feeling about somebody who was polite at the viewing.
Where the result goes
Into the tenancy record, alongside the application and, later, the signed agreement. If a guarantee is ever tested, the reference and the signed deed are in the same place.