Sample Letter to Bank Explaining Bad Credit

Getting a loan with a bad credit history can be tough. Banks do not give loans to bad creditors. A loan can be obtained provided the applicant can write a letter to the bank explaining the extenuating circumstances that led to the bank loan. This present article provides a Sample Letter to Bank Explaining Bad Credit.

On the off chance that you have an awful credit history and apply for a loan, many banks may request a letter, mentioning reasons for your poor credits. With subsidence and financial downtrends happening practically everywhere around the globe, it is normal for people or businesses to have bad credit scores. A bad credit score can make getting further loans very difficult. Nonetheless, you may get a loan if you can successfully elucidate the causes behind your poor credit scores. A few banks and loaning organizations may agree to loan you cash (be set up for a higher rate of interest) regardless of your poor execution in the past - but they will scrutinize your explanations behind your current debt condition. Writing a letter that explains your case, might help in a big way.

The letter that you write will be the deciding factor – it has to be sincere and convincing. Here, I will assist you on what to write in a letter to explain the terrible credit history. This guide will also show what archives you have to outfit, how to approach and address the powers at the bank for support, lastly I will provide a specimen letter explaining the awful credits.

Why compose a letter to bank explaining bad credit?

Remember, it will be challenging to acquire an advance or home loan, with poor credit record. Poor credits scores are generally considered consequences of your budgetary indiscipline, and they mean you would not most likely have the capacity to pay off your obligations in future. All things considered, such credits can happen regardless even if you not irresponsible or in financial dire straits. Many a time, unanticipated fiascos create financial catastrophes over which you might not have any control. If you have substantial explanations for your bad credits scores, you ought to disclose them to the loaning organization. Who knows, maybe they may rethink your loan application!

Some substantial explanations that can be presented

Clarify what turned out badly, and where:
  • You were let go from your employment
  • Presumably you or a relative had a restorative crisis that cost you gigantic measures of cash
  • There can be different dangers as well - your business was burned to cinders from an electrical fire
  • Someone broke into your home/business and took away resources

These are mere illustrations you ought not to make up a false story. Your circumstance might be one of the cases recorded above or comparable, where you were left helpless. When you compose a letter to the bank explaining the poor credits, you should have a veritable story and tell it convincingly. Keep in mind that an effective clarification could be the distinction between the endorsement and disavowal of your application.

Sample Letter to Bank for Loan Explaining Bad Credit

  • The letter to the bank must be persuasive and truthful
  • Recount your story in an engaging way, and keep it believable
  • Keep in mind, the bank folks are there to work and are not philanthropists
  • They will loan you cash if you can reassure that you can pay back
  • Whatever you mention, do not create mistrust
  • Offer convincing stories which you can prove with supporting evidence
  • For example, if you had a medical crisis, attach bills etcetera as proof to render believability to your story

Why do you need the loan

Why you need the loan is also important. You have to convince the banker that the money is required to meet a need, not a want. For instance:
  • If you are living in a tiny, leased house, it might be your need to apply for a house credit
  • An education loan is a need
  • A loan for a vehicle is also a need

You may get a loan regardless of your flawed credits if you need the money for your requirements and not your wants. When you compose your bank loan application letter covering awful credits, ensure you have a legitimate reason for the loan.

Recuperative measures since the disasters that led to bad credit

It is alright to have unexpected circumstances that lead to bad credit. However, it is not alright that you do not take restorative measures. All things considered, you had a crisis, required a ton of cash, spent all that you had, and failed to pay off your loan. The question is what did you do to recoup?
  • It is safe to say that you are working extra hours to earn more or have begun a small venture
  • Or you see an ancestral fortune coming your way in not so distant future
  • If your financial status has bettered, since the catastrophe, mention that
  • How do you plan to repay the loan if things turn sour once more? Remember that, the bank is lending you cash, and along these lines needs to ensure you don't waste it

A summary of what your letter must include:

  • A brief voicing of your demand. Specify the loan amount you need, admit the bad credit and provide an explanation
  • Specify which instalments were missed or delayed, and why – be truthful
  • Attach supporting documents
  • Stress on your present creditworthiness and why you are a good candidate for the loan

Sample Letter to Bank Requesting Loan, Despite a History of Bad Credit

The Branch Manager
Name of Bank
Address of Bank

Your name as in bank records
Your mailing address as in bank records
Your email id
Your mobile number

Subject: Letter of explanation for bad credit score

Dear Sir/Madam,

This is in response to your query regarding my bad credit history with respect to my application for home loan. I have applied for a loan for the purchase of a 3BHK apartment being promoted by ABC Builders, in XYZ locality, in this city. It is an 1150sqft property. Currently, I reside in a 2BHK rented accommodation where I pay a rent of Rs.16,000 per month, plus maintenance and electricity. I need a bigger space for my family.

I completely comprehend that my financial assessment is sketchy however I would like to offer a clarification. We purchased an SUV on a loan four years back, with the idea of paying it off from my significant other's earnings. Sadly, a month after we bought the vehicle, my wife suffered a stroke and had to resign from her job. Her treatment was very costly, and we had to dig into our savings. With my wife in hospital, I was unable to repay the loan amounts on time and this adversely affected my credit score.

Luckily, the difficult phase is over. My wife has recovered and was reemployed six months back, and is doing admirably well. She has also begun to take tuitions in the evening, to supplement our income.
We had previously committed an error by not taking adequate insurance; a mistake which we have rectified. My wife and I now have sufficient cover to protect us financially in case of an unanticipated mishap.

I request you to grant the loan that I have applied for, I guarantee that I will repay the loan without defaulting.

Anticipating your kind cooperation,
Yours sincerely,
Your name
Your signature


The above is an example of how a letter to bank explaining bad credit can be written. You can include your own extenuating circumstances in the letter that you make to the bank. Make the letter convincing and attach copies of all receipts and payments that were made during that period. Attach also copies of pay slips and all other sources of income as proof of your present financial capability.

Article by Juana
Juana is a freelance writer, with years of experience, creating content for varied online portals. She holds a degree in English Literature and has worked as a teacher and as a soft skill trainer. An avid reader, she writes on a variety of topics ranging from health, travel, education and personality development.

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