Q:

What is a letter of explanation?

A:

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. In some circumstances, the letter of explanation is given directly to the major credit reporting bureaus to be given out with a person's credit report any time one is requested.

A letter of explanation can be expected any time a prospective borrower is applying for a large sum of credit, such as a mortgage, and the lending institution recognizes the presence of defaulted or late payments on the purchaser's credit report. The purpose of the letter is to give specific details explaining the individual circumstances of the default and offers an opportunity to mitigate its impact on the applicant's chances for approval. A letter of explanation cannot be expected to salvage a history of bad credit but can offset the presence of a questionable section of history. The letter should use the standard business letter format, give specific details and be free of spelling and grammatical errors.

A letter of explanation is also the term used for a letter written by a job seeker to a prospective employer explaining the presence of a past criminal conviction.


Is this answer helpful?

Similar Questions

  • Q:

    How do you write a letter for explanation of a bankruptcy?

    A:

    The purpose of a letter of explanation of a bankruptcy is to explain to a potential lender the extenuating circumstances for an unfavorable credit history. These can include loss of a job, medical problems, family member deaths and other circumstances that are unlikely to reoccur. A combination of these credible excuses sometimes help reduce the waiting period for obtaining a new mortgage after bankruptcy or foreclosure, according to Innman News.

    Full Answer >
    Filed Under:
  • Q:

    How should you write an invitation letter for a dinner?

    A:

    Dinner invitation letters should be written with specific details, including the date, the event, names of senders, whether it is an adult-only reception and a request for guests to RSVP to a specific number. The letter's other specific contents should be tailored to the sender's party.

    Full Answer >
    Filed Under:
  • Q:

    What is an example of a preapproval letter?

    A:

    An example of a preapproval letter is a document from a mortgage lender informing a seller that a potential buyer is approved for a mortgage up to a certain amount. The letter will typically include how much money the mortgage lender is qualifying a potential buyer to borrow. According to the National Association of Realtors, this figure can be adjusted depending on the applicant’s credit history, expenses or income.

    Full Answer >
    Filed Under:
  • Q:

    How do you write a letter requesting a loan?

    A:

    A letter requesting a loan should be clear, provide all necessary information, and be typed using the standard fonts and format style on a computer word processor program, according to AviatekBank.com. Spelling and grammar errors should be avoided to appear as professional as possible, and it should use formal language.

    Full Answer >
    Filed Under:

Explore