One of the main limitations to current wave data assimilation systems is the lack of an accurate representation of the structure of the background errors. One method that may be used to determine background errors is the observational method of Hollingsworth and L¿nnberg <1986>. This method considers correlations of the differences between observations and the background. For the case of Significant Wave Height (SWH), potential observations come from satellite altimeters. In this paper, correlations of the differences between modeled SWH and bias-corrected ERS-2 data are calculated. The irregular sampling pattern of the altimeter is accounted for by adjusting the correlation length scales according to latitude and the calculated length scale. The results show that the length scale of the background errors varies significantly over the globe, with the largest scales at low latitudes and shortest scales at high latitudes. Very little seasonal or year-to-year variability in the correlation length scales is detected. Conversely, the magnitude of the background error variance is found to have considerable seasonal and year-to-year variability. By separating the altimeter ground tracks into ascending and descending tracks, it is possible to examine, to a limited extent, whether any anisotropy exists in the background errors.