A Credit Inquiry Explanation Letter serves as a tool for borrowers to clarify specific credit report inquiries that might otherwise raise concerns with lenders. These letters provide detailed explanations about why hard inquiries were made, such as rate shopping for loans, correcting reporting errors, or alerting lenders about possible identity theft.
When applying for credit, lenders review your credit report, including hard inquiries, to assess risk. While credit scoring models often group multiple inquiries for certain loans within a limited timeframe (typically 14-45 days), lenders might still question a high volume or unusual inquiries. An explanation letter helps put these inquiries into perspective.
Situations for sending a Credit Inquiry Explanation Letter include:
- Rate Shopping: If you’ve applied to several lenders for a mortgage, auto loan, or personal loan within a short period, explaining this shows you are responsibly seeking the best rates, not overextending credit.
- Incorrect or Unknown Inquiries: Clarify if an inquiry is a mistake or related to co-signed loans, which can prevent misunderstandings.
- Fraud or Identity Theft: Alert lenders if unauthorized inquiries appear, showing you are actively addressing potential fraud.
To write an effective letter, include:
- Your full contact information and the date.
- Lender or creditor’s name and address.
- Details about each inquiry (date, company, type of loan, credit bureau).
- A clear, honest explanation for the inquiries.
- A courteous closing statement and your signature.
For example, you might write: “The inquiries from XYZ Bank on [dates] were part of my mortgage rate shopping efforts to secure the best financing option, and I finalized the loan with [Chosen Lender].”
Sending this letter does not remove inquiries from your credit report—that requires disputing inaccuracies directly with credit bureaus like Experian, Equifax, or TransUnion. Instead, it helps lenders interpret your credit behavior more accurately.
Avoid vague or emotional language and focus on concise, factual explanations. Soft inquiries, such as those from pre-approval offers or personal credit checks, do not impact your credit score or require explanation.
For more about managing credit inquiries, see our Credit Inquiry Letter guide, and learn about the difference between Hard Credit Check vs Soft Credit Check.
Reliable sources for further reading include the Consumer Financial Protection Bureau on hard and soft inquiries and Experian’s guide on disputing hard inquiries.