Sample Letter of Explanation for Derogatory Credit

Learn how to write a letter of explanation for derogatory credit. Use our sample letter of explanation for derogatory credit as a template for your letter.

Sample 1 – Letter Explanation for derogatory credit

Name of Consumer
Address of Consumer
City, State, Zip Code

DATE

Name of Lender
Address of Lender
City, State, Zip Code

RE: Explanation for derogatory credit

Dear Name of Lender:

This letter is in reference to my application for a loan of $10,000 to purchase a new car. I understand that my credit rating is low and the purpose of this letter to explain the reason for this, and how I have remedied my financial situation. 

On DATE, the company I worked for laid off 200 employees including myself. During the exit interview, I was told it was because the company needed to reduce spending due to the economic downturn. I was in good standing with the company and was given a letter of recommendation from my supervisor.

Because of the economic situation, I was unable to get another job until DATE. During the time I was out of work, my family lived on my wife’s salary. We were unable to make payments on our credit cards and mortgage.

Since I got my new job, we have resumed payments on all of our debts and plan to pay them off. Now, I require a car for my new job and would like an auto loan. I will be able to make the payments every month.

Thank you for considering my situation. If you have any questions, I can be reached at Phone Number or Email Address.

Sincerely,

Signature of Consumer
Printed Name of Consumer
List of Enclosures: Copies of letter of leaving the job, recommendation from supervisor and hiring letter for a new job

Sample 2 – Letter Explanation For Derogatory Credit

Name of Consumer
Address of Consumer
City, State, Zip Code

DATE

Name of Lender
Address of Lender
City, State, Zip Code

RE: Explanation for derogatory credit

Dear Name of Lender:

This letter is written in response to the request for explanation for late payments on credit report by your lending institution. The loan in question is for a home on ADDRESS. 

My family is quite large, we have children, and we have been renting. Our current accommodations are too small and my children long for a yard to play in.

This house we are wanting to purchase would be the perfect starter home for us. I understand there is some question about previous credit problems. I am sure we can address those issues and put the lender’s mind at ease.

In YEAR, my husband was stricken with some serious illness. He began to have seizures and at times didn’t know who he was. He was in the hospital more than he was out. 

For two years, I had to carry the financial burden of the family. He was life lighted two times and it is a miracle that he is with us today. He has made a full recovery and is doing well.

This temporary setback was the cause of great financial turmoil in our lives. Thankfully, he has been back to work for 3 years and we have made a full financial recovery.

If your lending institution is kind enough to grant this loan, we will ensure that timely payments are made. If you have any questions, please feel free to contact me at 555-123-5874.

Sincerely,

Signature of Consumer
Printed Name of Consumer
List of Enclosures: Copies of letter of leaving the job, recommendation from supervisor and hiring letter for a new job

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