@Turning_This_Leaf_Over wrote:hello. I am trying to write a letter of explanation for two accounts I have from 7 and 5 years ago. One account is for 6k the other is for $102. At the time I was unable to pay these debts and they became charge offs. I have since spent the last 5 years making all of my payments on time and have not missed or made a late payment. All of the debts prior to this have been paid in full. These are the only two derogatory items on my credit report. However, according to multiple credit simulations if i pay these off my score will drop by over 70 points. It does not make sense, but that is the only reason I have not paid them off. I plan on paying them both off once they fall of my credit report. How do I explain this in a letter of explination. I dont want to mess this up as I have put a tremendous amount of effort into repairing damages to my credit report when I was younger. Please help.
I think you did a pretty good job above.
For letters of explanation I had to write I was told to keep it simple and to the point.
Your loan officer you've been dealing with should have a good idea of what their underwriter want's. While they can't tell you word for word (or write it for you) they should be able to point you in the right direction.
Basically you'll need a separate letter for each account (minimizes confusion when they skim and file vs actually reading it).
To whom it may concern:
In 2013 my (self/family) fell on hard financial times following (loss of job/major medical issue) at which time I was unable to keep up with my financial obligations.
In 2015 I landed a good paying job (or returned to work after recovering from medical event); since landing on solid ground I have diligently paid my current debts in a timely fashion and have made large strides in righting my creditors that were harmed during my financial struggles.
I currently owe Creditor A -- account #abc123 -- $6,000.53 and have an agreement to pay $143.16 a month until paid in full.
Thank you for your time and consideration of this matter.
Sincerely turning this leaf over
Obviously you'll need to put actual facts were I made up numbers and names. Don't lie, don't embellish; tell the truth.
One of the collections I had to explain was 3 months from aging off. I basically stated after hard times the creditor was unwilling to work with me. Since the account was beyond statute of limitations and risk of being sued for the debt was negligible I don't feel I should spend my down payment towards zeroing this debt that will naturally age off in three months.
I'm not saying what I did will fly by all underwriters, or that anyone should follow that example. I received no requests to pay the debt or to further explain... and my loan closed 3 day's after the scheduled closing (that was scheduled when submitting my offer to buy).
I'm sure one of the underwriting members will be through in short time to give you tips (and possibly point out where I could have dressed up my letter better).
Best of luck!
