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Credit Refusal Letter

Credit Refusal Letter

Refusing credit to someone, whether it is an individual or an organization, is not an easy task. It needs to handled sensitively so that the party re-approaches the sender of the letter in the future when the circumstances are more favorable...
Rahul Thadani
A credit refusal letter may be sent from one party to another during the course of a business, so as to inform the recipient that his request for credit has been denied. There are several reasons why this request may have been denied, and these reasons need to be clearly stated in the letter itself. This situation commonly arises between business vendors, so refusing credit can be a costly mistake for some parties, hence they should at least take the trouble of wording the letter in a manner that does not offend the recipient.

The aim should be to politely refuse the offer for credit, but also ensure that future transactions are not affected by this decision. In some cases, the refusal letter may be sent to an individual who has been denied credit due to his unfavorable credit rating, and this is something that also needs to be clearly stated in the letter. The individual should firstly be informed of the decision, then explained the reasoning behind it and then implored to improve his credit rating and then re-approach the sender of the letter in the future.

How to Write a Credit Refusal Letter?

The primary rule for writing any negative letter is to inform the recipient about the sole reason behind the denial, and also to thank him for his interest. All this should be done regretfully and with tact so that the person, or vendor, is not discouraged to carry out a transaction in the future. Here are some general tips for writing such a letter.
  1. The name and the designation of the recipient should be clearly stated.
  2. The reason why they applied for credit, or for an extension to credit period, should also be mentioned.
  3. They should then regrettably be informed that their request has been denied.
  4. The honest reason for this denial should also be clearly stated.
  5. Necessary thanks should be given to the recipient, and it should be made clear that they are welcome to continue transactions, or to carry out another transaction in the future.
  6. If possible, a suitable solution should also be provided.
Samples of Credit Refusal Letter

In this first sample, a business organization (ABC Ltd.) is writing a letter to one of its clients (XYZ Ltd.) informing them that their refusal for a credit transaction has been turned down by the organization. These examples of sample letters to creditors will also give you a better idea about such transactions.

20 May 2009,

Name and Address of the Recipient

Dear Mr. XYZ,

This letter is in response to your request made to us about extending you credit for the amount of $5,000, for the period of 1 month, for the items we supplied to you.

We regret to inform you that we cannot provide you with the said credit at the moment. As you are well aware, the state of the economy has led to severe repercussions for our industry, so we have decided to put our credit policies on hold for a few months.

You have been our valued customer for a long time now, so we can assure you that as soon as our credit policies change, you will be immediately informed. We hope that this does not affect our business relationship in any manner, and that we can continue our mutually beneficial partnership.

Looking forward to a better future,
ABC Ltd.

The next scenario is of a credit agency (ABC Ltd.) turning down the credit request of an individual (Mr. Draper), due to the large amounts of dues that he has, which has led to a very low credit score for him.

20 May 2009,

Name and Address of the Recipient

Dear Mr. Draper,

On behalf of ABC Ltd, I would like to inform you that your request for credit from our agency has been turned down.

While we welcome applications for credit, we do have a stringent policy for approving these applications, and unfortunately, your credit score tells us that we cannot take a chance offering you credit right now.

We would recommend that you undertake some assistance for refinancing and debt management and work on improving your credit score first, and then re-approach us after a few months. We will be more than happy to assist you with this, and we also look forward to doing business with you in the future.

Thank you for your interest in our agency.

ABC Ltd.

These are just some general samples. The content in them is not important, as different situations will throw up different content in various letters. At the end of the day, the recipient should not feel discouraged and should not hold a grudge against the sender of the letter. Instead, he should strive to improve his situation so that he can gain credit successfully, in the future.