How to Write a Goodwill Letter
How to Write a Goodwill Letter
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Credit repair sounds good, but consumers should almost always avoid working with a “credit repair” agency. These firms typically use borderline-ethical practices that try to beat the system and often leave you out of money and with no results. The worst part is that anything worthwhile they actually accomplish can probably be done by you for free. One of these tactics is a goodwill letter, and it can be one of the most powerful tools in credit repair. Let’s take a closer look at what it is and how to use it.
Credit repair sounds good, but consumers should almost always avoid working with a “credit repair” agency. These firms typically use borderline-ethical practices that try to beat the system and often leave you out of money and with no results. The worst part is that anything worthwhile they actually accomplish can probably be done by you for free. One of these tactics is a goodwill letter, and it can be one of the most powerful tools in credit repair. Let’s take a closer look at what it is and how to use it.
What is a Goodwill Letter?
What is a Goodwill Letter?
A goodwill letter is a written request to a creditor asking them to remove negative information from your credit report (called a “goodwill adjustment”). As the name suggests, you are asking the creditor for their courtesy and compassion, that they will forgive a mistake you’ve made.
Remember, This is Different than a Dispute.
Remember, This is Different than a Dispute.
One thing to keep in mind, both when you write the letter and when you receive your response, is that this is different than disputing an error. In this case, there hasn’t been a mistake on their end—you did miss a payment, end of story. The creditor, then, doesn’t owe you anything. Just keep this point in mind so that you won’t be disappointed if you don’t get the response you were hoping for.
When Should a Goodwill Letter Be Used?
When Should a Goodwill Letter Be Used?
You might get different answers to this question, depending on who you ask, especially if you were to talk “off the record” with a representative in the credit repair industry. In reality, this should only be used in a handful of situations:
If there was a technical error in processing your payment. If you tried to pay your bill and/or encountered some sort of glitch that led to a negative mark on your credit report, that would warrant potential removal by the creditor.
If autopay failed. If you set up autopay and it didn’t go through either due to a technical error (see #1) or lack of funds in your bank account, this might also warrant a removal. Perhaps it was an honest mistake that your bank account didn’t have the funds, because you had moved them for another purpose.
If you have an excellent history and made one mistake. Creditors understand that mistakes happen sometimes. If you have demonstrated your ability to pay on time consistently and then one month make a mistake, the creditor might think it’s reasonable not to hold that against you.
In all of these scenarios, the creditor can see intent and attempt. It’s clear that you wanted to pay and that you tried. With this established, it’s much more likely that they will honor your request.
Other Scenarios
Other Scenarios
It’s certainly possible that a goodwill letter might be effective in other scenarios. For example, if combined with an offer to pay a lump sum for an overdue debt, it could be used to remove a collections account from your report. Or, maybe you’ve made quite a few mistakes and missed payments with multiple creditors and want to use this strategy for all of them.
We won’t advocate for this use of a goodwill letter because there is no certainty that the offer will be accepted and because it’s an ethical “gray area.” After all, the creditors and collections agencies are legally bound to the credit bureaus to reports accurate information, and so the ability to have this information changed should not be abused. At the same time, you obviously want to restore your credit to the best possible condition, and it likely can’t hurt to ask.
Guidelines for Writing the Letter
Guidelines for Writing the Letter
If you move forward with a goodwill letter, be sure it includes some key pieces of information:
Your account number
The address listed on your credit report
In addition, ensure it meets these guidelines:
It should be a physical letter, not an email.
The letter should be concise (short and sweet).
You should describe the issue and what caused you to miss the payment.
Explicitly ask for courtesy and to have the item removed form your credit report.
Letter Template
Letter Template
If you aren’t confident that you can create the letter from scratch, feel free to use our template. Our template is a downloadable Word doc, but here’s the meat of the letter:
To whom it may concern,
I am writing in regards to [a late payment/late payments] on my credit report from [date(s)] for my [Creditor Name] account.
I understand how important it is to make timely payments, and that failure to do so creates an inconvenience for you. However, I missed my payment because [brief explanation for missing your payment, ideally showing attempt/intention to pay]. I am confident that this won’t happen again and I have taken steps to ensure my financial responsibility moving forward. [If applicable add: Since [and/or prior to] this mistake I have a perfect record of on-time payments.]
As a courtesy, I am requesting that [Creditor Name] make a goodwill adjustment and remove the late payment on [date] from my record. This will help improve my credit worthiness and give me renewed confidence in being a [Name of Creditor] customer in good standing.
Thank you for your consideration,
[Your Name]
What to Expect
What to Expect
After you send the letter, you should expect a response in about two weeks, though sometimes they take much longer or don’t come at all. If you don’t hear back in couple of weeks, you should call to inquire.
The Creditor’s Perspective
The Creditor’s Perspective
How will a creditor determine whether to make the goodwill adjustment on your account? Many credit experts believe it involves a combination of the following factors:
The length of your credit history with the company. The longer your credit history with the particular creditor, the more likely they are to offer a goodwill adjustment to you.
The length of time since the delinquency. Creditors are typically more likely to offer the adjustment to a delinquency that happened a while ago.
Your account status since the delinquency. Paired with the point above—creditors want to know that you’ve successfully and responsibly maintained your account since the delinquency. If you have, you are much more likely to receive the adjustment. In addition to on-time payments, they might also be looking for card activity, to make sure you are actively using the account but, at the same time, not overdoing it (spending more than you can afford).
Have you already had a goodwill adjustment, particularly in the last 24 months? If you’ve been given a goodwill adjustment from the same company within the last 24 months, the chances of receiving another are extremely low.
Give Yourself some Goodwill
Give Yourself some Goodwill
If you have a late payment or two on your credit report, this can be a great strategy to try, and you might get the results you are looking for. Remember that it’s much safer and cheaper than working with a credit repair firm, but it may not work out in your favor. The most reliable way to have good credit is to budget wisely, minimize credit card use, and/or pay your balances in full each month. If you implement these habits, you’ll be well on your way to a healthy credit score.
A goodwill letter is a request to a bank, lender or other creditor to remove a missed payment or other mistake from your credit report – an action known as a goodwill adjustment. As the name implies, the creditor is under no obligation to comply with or even consider your request. You’re totally at the mercy of your card issuer.
Goodwill letters are probably not an option if your credit file is messy and you’re looking for a credit score boost. But if you’re a responsible borrower who once missed a payment due to a medical or financial emergency or an honest mistake, a goodwill letter may succeed and help your score quickly recover from the damage. (Missing a payment can drop your score by as much as 110 points under FICO’s credit scoring model.)
“These things work best if it really looks like a fluke,” said Thomas Nitzsche, a spokesman for Money Management International. “If you’ve got a really spotty credit history where you missed a month here and you missed a month there \u2026 that’s not going to bode well for your chances.”
Your odds of success also depend on your ability to build a convincing case. A little perseverance helps, too – your creditor may be slow to respond or might ignore you entirely. However, there are success stories that prove a goodwill letter can be worth the time and effort.
Paying back your debt, providing proof are big pluses
Paying back your debt, providing proof are big pluses
Brynne Conroy, author of the personal finance blog Femme Frugality, once used a goodwill letter to get an unpaid $10,000 college debt removed from her credit report.
“My parents were getting divorced at the time, and there was some miscommunication over who would be handling which semester’s bills,” Conroy said. “I was young and under the impression that somebody else was going to pay it.”
Years later, after Conroy had married and moved away from home, she was contacted by a collections agency about the bill. She repaid it within six months of the collection call, but the negative item remained on her credit report.
After learning about goodwill letters online, Conroy decided to submit one to her former school.
“I explained to them what happened – that I was young and didn’t completely understand the process, and that as soon as I was aware of the debt I paid it off at a pretty fast clip,” she said. “I told them this is going to affect my ability to establish my own family.”
Conroy also included documentation both from the college and the collection agency as proof she had paid back the debt. Within a few months, she received a response from the school notifying her that the collection item would be removed from her credit report.
“I was fortunate in the fact that somebody in the financial aid office had pity on me and decided to remove that item,” Conroy said.
“I was fortunate in the fact that somebody in the financial aid office had pity on me and decided to remove that item.”
When is it a good idea to write a goodwill letter?
When is it a good idea to write a goodwill letter?
Goodwill letters can help you get an atypical credit mistake wiped clean. Here are some special cases in which your creditor might give you a break.
You missed a payment because of an emergency
You missed a payment because of an emergency
In times of emergency, your day-to-day responsibilities can temporarily fall by the wayside. If you’re injured in a traffic accident or your home is damaged in a flood or a fire, chances are paying your credit card bill won’t be a top priority. And a sudden expense such as a medical bill or an urgent car repair can leave you without the funds necessary to make your next payment.
Your payment failed to transmit
Your payment failed to transmit
Online payments are usually smooth and secure – particularly among major banks and issuers – but glitches do happen on occasion. Perhaps the bank’s servers were down the moment you made the payment and, unbeknownst to you, it never was transmitted.
Maybe there was a brief blip in your own internet connection that blocked the payment, and you didn’t notice it. Either way, you could be forgiven for getting hung out to dry by technology.
You moved, and your bill went to your old address
You moved, and your bill went to your old address
Moving can temporarily turn your life upside down, and things can fall through the cracks. Perhaps you weren’t able to get all of your mail forwarded promptly to your new address, or a credit card bill found its way to your old mailbox.
5 tips for writing and submitting a goodwill letter
5 tips for writing and submitting a goodwill letter
Following are a few tips that can help increase your chances of getting a goodwill adjustment. You also can find several goodwill letter templates online and view an example below.
1. Be polite.
Never use a negative tone when writing a goodwill letter. Remember – the issuer or lender is under no obligation to erase a misstep from your credit report, no matter what circumstances led to it.
2. Don’t write a novel.
When explaining why you missed a payment, include any relevant facts. For instance, if your home was damaged in a flood, explain why you weren’t able to find a way to make your payment (i.e. there was a mass power outage and thus no way to access your online account, or you were too busy evacuating your home to pay your bill).
However, including too many details or over-explaining your situation can be counter-productive. Mike Sullivan, a personal finance consultant in Phoenix, recommends being direct and concise.
“I don’t think any customer service agent wants to spend hours reading a long story, so I would get to the point,” Sullivan said.
3. Include supporting evidence.
Conroy’s case illustrates the importance of providing proof to support your case. It could be as simple as a note from a collection agency that your debt was paid in full. Or if you failed to pay because you were seriously injured in an auto accident, you could provide copies of the police report and your hospital bill.
“Anything that can back up your claim and give some evidence that it was beyond your control is definitely going to help you,” said Nitzsche.
4. Make sure it gets to the right person.
Sullivan recommends sending your goodwill letter to a customer service agent at your bank, rather than the billing or finance departments. You could even deliver a copy of your letter to the manager of your bank’s local branch.
“When you’re sending the letter, it’s important that it gets read by somebody who can do something about it,” Sullivan said.
5. Follow up.
Chances are your goodwill letter won’t get an immediate response. If you don’t hear anything after about 30 days, follow up with a phone call or an email.
“I think [following up] is required in most instances unless your situation is so simple that they’re going to act on it,” Sullivan said. “There’s a good chance it is going to sit in a pile, so follow-up is important.”
It doesn’t hurt to try
It doesn’t hurt to try
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A single missed payment can tarnish an otherwise clean credit report and severely damage your credit score. If you have an out-of-character credit blemish and preparing to apply for a home loan or a high-end rewards credit card, a goodwill letter might be worth the effort.
If it works and your FICO score jumps from the high 600s to the mid-700s, you could ultimately save thousands of dollars in mortgage interest charges or earn a big credit card sign-up bonus.
Even if you’re not in the market for a new home or a credit card, a score boost from a goodwill adjustment can paint a more accurate picture of the responsible borrower you truly are.
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