How a goodwill letter can improve your credit

By Kevin Cash

A goodwill letter is a note written to a creditor that asks for a bad mark on your credit report — typically a late or non-payment — to be removed. Non-payment information on your credit report almost always results in a reduced credit score, but a successful goodwill letter will remove the mark and return your credit score to its prior state.

And while a goodwill letter can help improve your credit score, a creditor is in no way obliged to accept your request. The success of the removal is reliant on both the severity of the infraction and the quality of the letter itself.

What to include in a goodwill letter

A goodwill letter should be persuasive, polite and informative in a way that evokes sympathy from the creditor while making it easy for them to identify and remove the missed payment in question.

Identifying information: If the creditor doesn’t have all of your personal details readily available, they may be unwilling to seek them out. A goodwill letter should provide the necessary information — such as your name, address, the specific account, account number and the date of the missed payment — so that it’s easy for the creditor to identify, and hopefully expunge, the missed payment.

Story behind the mispayment: Perhaps of equal importance to the identifying information is the story of why the payment was missed, the associated hardship and how missing this payment will result in a positive behavior change moving forward. For example, if you missed your payment because of an employer layoff, let the creditor know how this has affected your life on the whole. An essay is not required; you need only write enough to explain the situation and convince the creditor that this was a one-time misstep that won’t occur again.

How it’s affecting your future: You may also want to include some explicit information on how the payment is negatively affecting your future financial prospects. If you plan on applying for a mortgage, for example, and the negative mark is preventing you from qualifying, let them know. Maybe the ding is blocking you from getting a loan required to grow your small business. Whatever information you think may personalize the request helps.

With a goodwill letter you’re essentially asking someone for a favor. Keep this in mind when drafting.

Who do you send the letter to?

The goodwill letter must be sent to the owner of your debt — your creditor — the mailing address of which should be listed on their website. A quick google search of the name of your bank along with “mailing address” should return the proper location.

It also can’t hurt to call your creditor in supplement to the letter. Remember to stay level-headed and rational when describing your situation on the phone, especially if there’s any pushback on their end. (It can be easier to get carried away discussing the situation live.)

Will the goodwill letter work?

The probability of a goodwill letter working also depends on factors that are out of your immediate control — largely your existing history with the creditor.

If you’re a new customer who’s missed two payments within your first 6 months of account ownership, the odds of the creditor erasing a missed payment are less likely than if you’ve been a loyal customer for years and have just now experienced your first misstep.

It’s important to keep realistic expectations. And, of course, it’s always easier to be proactive and prevent a mistake from happening than fixing it in the aftermath. If missing a payment was caused by a simple lack of attention, consider setting up payment alerts or even autopayments. Assuring payments are made on time moving forward will negate the need for any future goodwill letters.

Written on October 6, 2016

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