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A letter of explanation for derogatory credit may help convince a creditor, employer or insurance company to favor the consumer’s new credit request. Use these sample letters of explanation for derogatory credit as templates for your formal letter.
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A Letter of Explanation (or LOE) is commonly requested by a mortgage lender or underwriter to get specific information from the borrower and complete the loan application process. A Letter of Explanation Might Be Requested If You Have: Other names on your credit report Your source of income needs explanation (e.g. self-employed borrowers)
A letter of explanation is a 100-word letter that sits on file at the three major credit bureaus; TransUnion, Experian and Equifax. This letter then gets sent out to anyone requesting a copy of your credit report, providing context for any negative credit entries.
In the world of finance and economics, a letter of explanation is a formal letter to a financial institution that gives specific details regarding an incident or circumstance that is outside the normally accepted scope of business.
Subject: Letter of Explanation – {Appropriate Section} Attached: (1) {document name 1}, (2) {document name 2}, (3) {document name 3} {City, Date} Dear Officer, I am writing you this letter to explain some points that might have caught your attention when considering the attached documents relating to {Appropriate Section}.
If there was a death in the family that took you away from work, then a letter of explanation should say that along with a possible copy of the obituary. If you put $5,000 in your savings account two months ago because an aunt left you some inheritance, then send a copy of the check from the lawyer and any type of letter or will that can verify it all.
Letters of explanation help lenders make decisions about marginal applicants; however, they don’t help applicants with insufficient credit or income. A man is typing on a keyboard. credit: fotomaximum/istock/getty Images
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The Explanation Letter has mulitple uses and can be altered to only reflect what is needed. 1. From the Credit File, 2. Click on the Drop Down list form Other.
The letter can help enhance your home loan application by allowing the lender to get to know you better so that you come across as an honest and reliable applicant. What is a letter of explanation? Now that you know a letter of explanation shouldn’t be considered scary, let’s discuss what exactly it is and how it comes into play.