A hardship letter is a written explanation of the circumstances that led to negative credit events on your report. It gives lenders context for your credit history.
You need a hardship letter when: you have late payments, collections, a short sale, foreclosure, or bankruptcy in your history and the lender requires an explanation.
Keep it brief, honest, and focused on what happened, what you learned, and how your situation has improved.
When Needed
You typically need a hardship letter when applying after: bankruptcy, foreclosure, short sale, deed in lieu, or significant late payments. Some lenders also require one for large credit gaps.
How to Write One
Keep it to 1-2 paragraphs. State the cause of the financial difficulty (job loss, medical emergency, divorce), what you did to resolve it, and how your situation has stabilized.
What to Include
Include: the dates of the hardship, what caused it (job loss, illness, divorce), what you did to address it, evidence of recovery (steady job, on-time payments), and why it won't happen again.
What to Avoid
Don't blame others, make excuses, provide excessive detail, or write more than 2 paragraphs. Don't focus on negative emotions - focus on recovery and stability.
Examples
Good: 'I was laid off in January 2023. I found new employment in June 2023 and have been employed since. All payments have been on time for the past 18 months.'
Tips
Write in your own words. Be specific but brief. Show that the hardship was an isolated event. Demonstrate your current financial stability. Proofread carefully.