If a lender asks for a credit explanation letter, don’t panic. This letter is not a punishment. It’s just a simple way for us to understand what happened on your credit, why it happened, and what has changed. A clear letter keeps your VA loan on track, especially for manual underwriting.

What a Credit Explanation Letter Is

A credit explanation letter is a short note that explains any negative credit items. This can include late payments, collections, charge-offs, foreclosures, bankruptcies, or any other problem shown on your credit report.

The goal is simple: explain the issue so we can document your loan file correctly.

Why We Need It

We are looking for patterns. If something went wrong before, we need to know:

• Was it a one-time event?
• Is it still happening?
• Did you fix it?

A strong explanation shows stability and helps us move forward.

The 4-Part Format You Must Use

Your letter needs four parts for each negative credit item. Keep each part short.

1. What Happened

Say the problem clearly.

• “I was late on this payment.”
• “This account went to collections.”

2. Why It Happened

Give the real reason. No extra stories.

• “My hours were cut at work.”
• “We had an unexpected medical bill.”
• “This was an oversight and I missed the due date.”

3. How the Problem Has Been Fixed

Explain what is different today.

• “My income is steady again.”
• “The account is now current.”
• “That hardship is over.”

4. How You Will Prevent This Again

Show the steps you took to avoid a repeat.

• “We made a household budget.”
• “I set up automatic payments.”
• “We started emergency savings.”

Only Share What’s Needed

Do not overshare. This is not a diary entry. Only explain what matters to the credit issue.

Also, do not say anything you cannot prove. If the issue happened recently, we may need documents to support your reason. If it can’t be proven, don’t use it as the reason.

When Supporting Documents Are Required

The date of the credit problem decides what we need:

More Than 12 Months Old

You only need the explanation letter. No documents are required.

Within the Past 12 Months

You need the explanation letter and documents that match your reason.

Examples include:

• Paystubs showing reduced or missing income
• Medical bills or insurance statements
• Car repair invoices or other emergency costs
• Any notice tied to the hardship you list

Do Not Copy and Paste Explanations

Each negative credit item must be explained on its own.

You may only use one explanation for multiple items if:

• They happened in the same time period, and
• They were caused by the exact same event.

If not, each item needs its own explanation.

Simple Template You Can Follow

To Whom It May Concern:

What happened: [state the problem]

Why it happened: [state the real cause]

How it was fixed: [state what changed]

How I will prevent this again: [state your steps]

Sincerely,
[Your name]

Frequently Asked Questions

Do I need a credit explanation letter for every late payment?

Yes. Each late payment, collection, or negative item must be explained unless we tell you it is not needed.

How long should the letter be?

Short. A few sentences per item is usually enough. We want clear facts, not extra stories.

What if I don’t remember the exact reason?

Tell the truth as best you can. Do not guess or make up a reason. If you are unsure, say that and keep it simple.

Do I need proof for older credit problems?

No. If the issue is over 12 months old, we only need your explanation.

What counts as proof for recent credit problems?

Anything that supports your reason, like paystubs, invoices, medical bills, or written notices tied to the problem.

Can I use the same explanation for multiple accounts?

Only if they happened during the same time and were caused by the same event. If not, each one needs its own explanation.

Need help with your letter? We can review what you write and tell you if anything is missing before underwriting sees it.

Start your pre-qual here.