Police in Lincoln said the woman used a butane torch to burn the letters and left some of them on her bedroom floor.
She then went to another room to take a nap and woke up a short time later to discover that her carpet was on fire, police said.
Firefighters responded and put out the flames quickly.
No one was injured but the fire caused about $4,000 in damage to the building, officials said.
The woman received a citation for negligent burning.
The Associated Press contributed to this report.