Credit Inquiry letter of explanation and removal BF Blog

Credit Inquiry Letter Of Explanation And Removal

There may come a time when you are attempting to obtain a mortgage or personal loan. You may need to send a credit inquiry letter of explanation.  Or you may need to send a credit inquiry removal letter to fix your credit report.  Both may be essential to obtain the additional credit you hope to receive.  I have had to write such letters in the past to obtain a mortgage or to refinance a mortgage. These letters are not uncommon and there is no reason to be alarmed or concerned. A credit inquiry letter of explanation and removal are standard types of inquiries that require short descriptions with specific information to clear up any concerns.

These concerns may include an explanation for a late monthly payment on a credit card account, any gaps in your financial history, or employment history.  However, it is not limited to just these inquiries.  Finally, you may need to draft a credit inquiry letter of removal for an unauthorized credit inquiry for a hard credit inquiry or multiple soft credit inquiries. You will want to have this taken care of prior to seeking a loan.

Let’s review in depth the reasons why each may or may not be required. Also, how to write such letters should you be asked. You always want to be in a position to obtain the best rate for your mortgage or personal loan.

Credit Reporting

It is very important to obtain a copy of your credit report yearly or use a credit score app to review it at your leisure. You should make sure that all the information posted on the reports from TransUnion, Experian, and Equifax is accurate. There should be no unauthorized credit openings, hard inquiries, or soft inquiries on your credit history that were not initiated by you. You should also investigate any late payments, or derogatory marks from each of the major credit bureaus.

When you are in the process of submitting a mortgage application to the mortgage lender, there may be a need to have erroneous information removed. Multiple credit checks will be done on you to gauge your ability to pay back a loan.  

However, a letter of explanation may be required if the information proves to be true.  Hence, we should address the erroneous information first with an Inquiry removal letter prior to applying for a mortgage or loan.

Per the Fair Credit Reporting Act companies that provide information to consumer reporting agencies also have specific legal obligations, including the duty to investigate disputed information. Consequently, The Fair Credit Reporting Act is enforced by the Federal Trade Commission.

Hard or Soft Credit Inquiry Removal Letter

A soft inquiry and a hard inquiry will be noted in your credit report. A soft inquiry does not impact your credit score and is only seen by you. However, you do not want them on your credit report if they were not authorized by you.

A hard inquiry stays on your credit report for at least two years. It can negatively impact your credit report for up to a year. A hard inquiry can reduce your credit score by up to five points during that time per Experian. Consequently, multiple unauthorized hard inquiries within a short period of time can indicate identity theft. This is a huge red flag. Especially if they are recent credit inquiries attempting to open a new credit card account in your name. This will reduce your credit score substantially by five points for each inquiry. Therefore, if these hard credit inquiries were not authorized by you then you will want to remove them as soon as possible.

An inquiry removal letter should be sent to each of the credit bureaus previously mentioned to remove any erroneous information. This letter should express your desire to correct information in your credit report. The inquiry removal letter should clearly state the reason or reasons for the correction. Hence, Your Credit Inquiry Removal Letter should include the following personal information:

  • Your complete Name
  • Street Address
  • Date of Birth
  • Phone Number
  • Credit Bureau Name
  • Credit Bureau Address
  • Date
  • Source of Inquiry – Lender’s Name
  • Dates the information appears on your credit report.
  • The reason for removal – You did not authorize this inquiry.

Note: It is optional to provide your Driver’s License and/or Social Security number for additional verification.

The Consumer Financial Protection Bureau provides a sample letter for credit report disputes.

Inquiry Letters To Remove Errors

There could be information on your credit report that is erroneous or does not belong to you. It is not uncommon for the credit bureaus to try to tie your report with family members. They could even attach information from someone else using your social security number. I had this problem with someone using my social security card to obtain apartments. Luckily, they did not try to open up credit. However, strange addresses kept showing up on my credit report.  That is why it is always a good idea to check your credit report yearly and dispute any and all erroneous information. A Credit report inquiry letter to remove errors will have to be sent to each of the credit bureaus as well.

  • Your complete Name
  • Street Address
  • Date of Birth
  • Phone Number
  • Credit Bureau Name
  • Credit Bureau Address
  • Date
  • Account numbers or other information to identify the account.
  • Source of Inquiry – Lender’s Name
  • Type of disputed information. i.e. unknown credit account/tradeline, inquiry.
  • Dates associated with the item being disputed.
  • Dates the information appears on your credit report.
  • Explanation of item being disputed.
  • The reason why you feel the information is inaccurate.

Here are some additional resources to review a sample letter:

Sample Letter From Consumer Financial Protection Bureau

Sample Letter from the Federal Trade Commission

Contacting The Credit Bureaus

You can also dispute information online or by phone for each of the credit bureaus. However, given the nature of this request, I would suggest that you do it in writing via certified mail. This mode of mailing will provide a delivery receipt.

Equifax

Online: https://www.equifax.com/personal/credit-report-services/credit-dispute/

By phone: Phone number provided on credit report or (800) 864-2978

EXPERIAN Online: https://www.experian.com/disputes/main.html

By phone: Phone number provided on credit report or (888) 397-3742

TRANSUNION Online: https://www.transunion.com/credit-disputes/dispute-your-credit

By phone: (800) 916-8800

Letter of Explanation

An explanation letter may be required when seeking a mortgage or loan to clear up any inconsistencies or discrepancies.  Again, this is not uncommon. A home loan is a request for credit for hundreds of thousands of dollars and the lender wants to be sure that you are not a risky investment. They are not typically needed for an auto loan. However, it might be required for a personal loan application to proceed. Therefore, if there is any inconsistency regarding your income, credit report, or job situation they may want to hear from you.  This is a blessing since it will give you an opportunity to explain in your own words what happened.  On the other hand, it is your opportunity to provide any additional information to plead your case to the financial institutions. Life happens and they are aware that what is being reported is not the whole story.

Therefore, you can look at this as a positive rather than entirely a negative request. Letters of explanation are not very difficult to write. They help you get to the next step in the loan process. A great letter of explanation will almost guarantee that your loan will move forward. Finally, this is the mortgage underwriter’s job and should not be taken personally. Therefore, stick to the facts and make every effort to be honest.

Consequently, writing a letter of explanation will be specific to your personal circumstances. You may have to explain gaps in your job history, income, current financial improvement, or length of residence.  Your loan officer may provide one for you to review or simply give you guidance on what will be needed to secure your loan. Our loan officer was very good at explaining exactly what we needed to write. 

Elements Of A Great Letter Of Explanation

A great letter of explanation is a written document that addresses each of these inquiries with the details surrounding your financial situation.

  • Should be a short and to-the-point type of letter.
  • Explain in detail the circumstances that led up to the issue.
  • Explain how your finances have improved.
  • Length of unemployment.
  • Length of residency.

Letter Of Explanations For Credit Inquiries

You may have to explain why there were multiple credit inquiries for credit on your credit report. You will need to list each creditor, the date pulled, the reason for the inquiry pulled, and indicate whether it resulted in a new debt being obtained. 

Click here for a sample of a letter of explanation template for credit inquiries from bayareacapitalcommercial.com.

Click here for a sample letter of explanation template for credit inquiries from kc.fcmpartners.com

Your explanation might simply be these were unauthorized credit inquiries that are currently being disputed. Your loan officer should have advised you to not open or attempt to open any new credit, buy a new car, etc. while you are in the process of obtaining a mortgage.

Recap

A Credit inquiry letter of explanation and removal is your opportunity to set the record straight. It allows you to explain things on your credit report in your own words.  The removal letters allow you to clear up erroneous information and explain why they should be removed. Therefore, do not look at a credit inquiry letter of explanation and removal negatively. It is the only way to turn a negative into a positive. However, every effort should be made to safeguard your credit in the future.

It is important to safeguard your credit because of all of the credit breaches and data selling currently going on. We have to be proactive to stave off fraudulent activity. Luckily, there are things we can do to prevent the worst of the worst. Therefore, the best thing to do if you are not in the market for additional credit is to freeze your credit reports to stop any inquiries from going through. 

There have been so many breaches from banks, retail, credit card companies, and even credit bureaus that none of us are fully protected.  Hence, all of this threatens our credit cards and bank accounts. However, no matter what information they may have of yours if they cannot obtain your credit report, they cannot open additional tradelines of credit in your name. This is probably the best resource to protect your financial situation. However, there are other things that you can do.

Things To Do To Safeguard Your Credit

  • Check your credit reports from all three bureaus yearly – it is free.
  • Use Credit report apps to check your credit score more frequently.
  • Check your credit cards and bank statements monthly.
  • Freeze your credit report with all three bureaus if you are not actively looking for credit.
  • Dispute any erroneous information as soon as possible.
  • Put alerts on any transactions from all your credit accounts.
  • Have a recovery plan should your credit become compromised.
  • Do not give out credit and banking information via phone, email, or text. Your bank will never ask for this information.

This content is for information purposes only.  I do not endorse any of the companies mentioned.  Please research and do your own due diligence. I do not get paid if you click any of the links.

Additional Reading:

How To Save $10,000 In A Year

How To Manage Credit Card Debt

What Hurts Your Credit Score The Most?

Is Credit Card Fraud A Felony?

Scroll to Top