People apply for credit for various reasons, such as covering expenses or financing a car or home. Obtaining a loan usually involves submitting an application and undergoing an assessment by the lender. However, approval is not guaranteed.
A lender may decline an application because of the applicant’s credit history, income, existing debts, or other eligibility requirements. If the reason is unclear or appears inaccurate, the applicant can request an explanation.
What is an Explanation Request Letter?
An explanation request letter is a formal letter asking a lender to clarify why a credit application was rejected. It can also highlight concerns about the accuracy of the information used in the assessment and request a review.
What is the Purpose of Requesting an Explanation?
The purpose is to understand the decision rather than create a dispute with the lender. Knowing the reasons for rejection can help an applicant identify incorrect information, understand the eligibility requirements, and consider improvements before applying again.
How to Write an Explanation Request Letter
Asking for clarification is appropriate when the request is polite and focused on the facts. Consider the following tips:
- Refer to the rejection notice, including its date and your application reference number.
- State the reason given for the rejection, if one was provided.
- Explain any concerns about that reason and mention relevant supporting information.
- Politely request clarification about the information used to assess your application.
- Ask how to submit corrections or request reconsideration, if appropriate.
- Close by thanking the recipient and providing your contact details.
Sample Letter
Date: [Insert Date]
[Recipient’s Name]
[Lender’s Name]
[Address]
Subject: Request for an Explanation of Credit Application Denial
Dear Mr. ABC,
I received your letter dated [Date] informing me that my credit application, reference [Application Number], was declined because of my credit history.
According to my records, I have made my payments in full within the required timeframes. I would therefore appreciate clarification about the specific information that led to this decision.
I am concerned that the assessment may have relied on inaccurate or incomplete information. Please explain the relevant credit history findings and let me know how I can submit supporting documents or request a review.
If an error is identified, I would appreciate reconsideration of my application based on the corrected information.
Thank you for your time and assistance. Please contact me at [Contact Details] if you require further information. I look forward to your response.
Sincerely,
[Sender’s Name]
[Signature]
