A credit-explanation letter is written to a potential creditor or a credit bureau providing rationale for situations beyond a person's control that led to a late payment, according to the Credit InfoCenter. The letter should detail why the payment or payments were late.
Reasons cited for the late payment may include loss of employment, a debilitating illness that prevented the party or family members from securing or maintaining employment, increased debt or medical bills, or an unpreventable family situation that may have affected the person's ability to pay. A credit-explanation letter typically also includes details about preventative measures taken to ensure late payments do not occur again in the future, according to the Credit InfoCenter. These measures can include proof of secure employment, a payoff of debt or a savings account established for the future.
When writing a credit-explanation letter, an individual should reference the entry cited on the credit report for clarity, and note any discrepancies or errors within the report that are currently in dispute with a lender, according to Trulia. A credit-explanation letter is typically kept on file at one or all of the credit bureaus, or used by lenders to make a decision regarding future credit for an applicant.