Late payments can significantly impact your credit score, but the effects go way beyond the cost of paying late fees or penalty APRs. The primary factor of your FICO score is your payment history. Therefore, having them removed with a Goodwill letter is advisable if you have negative items such as late payment on your credit report.
What is a Goodwill letter?
Generally, Goodwill letters are also known as forgiveness removal letters. It is a letter you may send to your creditor requesting that they take a bad entry off of your credit reports.
You can certainly repair your credit by writing a Goodwill letter to a creditor, which is quite simple. Drafting a goodwill adjustment letter is easy and won't harm your credit, even though creditors aren't required to fulfill all of your requests.
If your relationship with your creditor is currently positive, and you have a decent credit history, a Goodwill letter will have the greatest chance of having a negative mark removed. Making on-time payments for a long time following a missed payment is also beneficial.
Creditors are unlikely to be prepared to remove the negative marks from your credit report if you frequently make late payments.
What are the differences between a Goodwill Letter and a Credit Dispute Letter
You should file a credit dispute letter if you discover a false negative mark on your credit report issued by a creditor or collection agency. Take into consideration whether the negative information on your credit report is legitimate. If you honestly think the credit report information is inaccurate, sending a dispute letter is preferable.
A Goodwill letter differs from a dispute letter. You may claim a piece of information is false by raising a dispute over something with the three main consumer credit bureaus. But a Goodwill letter is sent to apologize for your delinquency and to reaffirm your commitment to making future payments on schedule.
You should promptly dispute wrong information with the three major credit agencies, Experian, Equifax, and TransUnion, if a late payment is incorrectly shown on your credit report.
What are the differences between a Goodwill Letter and a Pay For Delete Letter
Many people consider that Goodwill letters and pay for delete letters are similar.
However, a Goodwill letter requests creditors to remove genuine, negative late payment entries. In contrast, a pay for delete letter asks a creditor to remove an account or any other bad item from your credit report in exchange for paying the entire balance, a portion of the balance, or nothing at all. When you owe an amount that cannot be disputed to the credit bureau, you may use a pay for deletion letter.
Both these two different letter types erase bad credit information from your credit report. Nevertheless, neither is assured to be successful, and it will depend on the policy and disposition of the creditor or collection agency.
When you should write a Goodwill letter
You should write Goodwill letters and send them to creditors if you have valid reasons or excuses for late or missed payments. You can't simply have a late or missed payment and request the creditors to remove it from the credit reports by sending a Goodwill letter.
However, if you have a healthy history of on-time payments and a decent/strong credit profile, the following are just a few valid reasons to write Goodwill letters:
- Due to a temporary financial hardship, such as the loss of a job or a divorce, you missed a payment.
- Due to a medical emergency upon you or a loved one, you missed a payment.
- You missed that the old balance wasn't paid off from the credit card while in the middle of a balance transfer.
- You changed addresses, but you didn't get the bills there.
- You face delays due to switching banks.
- You had wrongly configured automatic payments.
How your late payments are listed in the credit report and affect the credit score
Your credit score might be negatively affected by late fees and excessive APR. As your FICO score is mainly based on your payment history, even one payment that is delayed by 30 days can significantly impact your score. The more recent the late payment, the more it will impact your credit score.
A Goodwill letter might affect your credit score less if you missed a payment long ago. Instead, a Goodwill letter might be more effective in removing a payment you missed last month and impacting your credit score.
Credit reporting companies also consider how many days your payment was late. It will have more of an effect to "forgive" a 60-day late payment than eliminate a 30-day late payment. Remember that negative information may remain on your credit report for up to seven years. Higher credit score holders suffer more severe penalties for late payments, frequently losing 100 points for just one missed payment. In comparison, a person with bad credit might only see a 50-point drop for a mistake of the exact nature.
Although many elements affect your credit score, most people can anticipate a rise in their credit score of between 60 and 110 points simply by having one negative mark such as a late payment removed from their most recent credit report.
An appealing Goodwill letter implores the creditor to show compassion and mercy. A Goodwill letter also conveys to creditors that you're committed to restoring or improving your credit score. However, that doesn't guarantee they'll grant your request to remove the negative items from credit reports.
The creditor can give you a second chance if you're a dependable borrower and want to keep doing business with them. The lender might agree if the borrower has never before been delinquent, makes up the missed payment right away, and requests to remove such items from the credit reports once in a while.
A Goodwill letter to improve credit score - Does it work?
Sadly, no definitive studies demonstrate how effectively Goodwill letters work; only anecdotal evidence exists. If you write a Goodwill letter, there is no assurance that it will be effective. Practically, you don't have a set formula to apply for increasing your chances of success.
Furthermore, many banks explicitly indicate that they won't help you if you send a Goodwill letter. For example - Bank of America claimed they could not comply with pleas for a goodwill adjustment because they must provide the three credit bureaus with comprehensive and correct information about every account number.
Instead, Bank of America advises that the best method to deal with a bad credit history is to rebuild your credit by continuing to make payments on time for each credit account number you hold.
How long does it take to get a response to a Goodwill letter?
A Goodwill letter is an unofficial letter written to the original creditor. As a result, the creditors may not reply to the letter at all or within a particular time to remove negative marks.
Additionally, the three credit bureaus can update your credit reports at the request of a creditor without notifying you first. So you should check your credit reports frequently for any changes about missed or late payments. In addition, you may contact them again or send a follow-up letter after a month if they do not respond.
How to write a Goodwill letter to remove late payments
Goodwill request letters are unofficial but professional, business-related mails. So, they must be brief and precise. These letters should explain the reasons behind the missed payment and what you've done to stop it from happening again.
In a Goodwill letter, you should provide the creditor with as much information as possible. It's more probable that your creditor will be able to comply with your request without additional labor if you provide them with every detail.
The following details should be in your letter when writing Goodwill letters to creditors:
- Your account number and address.
- The name and location of the creditor.
- Date of late or delayed payments.
- A brief explanation for the missed payment and acceptance of responsibility.
- A notification of your actions to enhance your creditworthiness, like turning on autopay.
- Your direct and precise request, often known as a "goodwill adjustment," to have the negative items cleaned from your credit reports.
- Copies of any supporting documentation, such as hospital bills, if you have had a medical issue lately.
Here is a sample Goodwill letter template that may help you in getting started if you want to remove NEGATIVE items from your credit reports:
Things to consider while writing a Goodwill Letter
If you analyze the above-given successful Goodwill letter example, you’ll find some essential qualities to consider while writing this letter to creditors. The guidelines are:
1. Be nice and polite
This letter should be a physical letter, not an email. Therefore, be sure to express your gratitude and care for every detail. Show respect and politeness through your words, so the creditors know you value their time and consideration.
2. Be concise and to the point
Make sure your letter is brief and to the point if you want to get the creditor's attention. Three to four paragraphs should be sufficient to convey your notion. Before submitting it, get it checked by someone else.
3. Accept accountability for your errors
You should accept your mistakes (late payments) and be honest in your justification. Share your reasons in detail, such as unemployment, medical issues, death in the family, major home renovation, etc. Do not try to give baseless explanations.
4. Describe how you'll keep up with payments
Next, inform them how you'll continue to make payments on time. Reassure creditors that you'll make payments soon if you were jobless for some time but now got a job.
5. Show your good payment history
To acquire the creditor's confidence, you must express how well you managed personal finances earlier and briefly describe your past financial difficulties. They are more likely to give you a reprieve if you show a good payment record before and after that critical time.
6. Explain the significance of the goodwill adjustment
Tell the creditor how the goodwill adjustment will help you improve and win future credit opportunities such as small business loans, mortgages, credit cards with a low APR, etc.
Show that you're in charge of your money and that your credit matters to you. Make them understand that their positive feedback in response to your letter will benefit your personal finance and business relationship.
7. Add your contact information
Provide your address, phone number, and email address to your creditor along with the letter. It's crucial to provide your personal contact information because you could need to contact your creditors on several occasions and vice versa.
8. Remember to follow up
Your lender is not bound to respond to this letter. Therefore, your responsibility is to call them and verify whether or not your letter was received. If you do not get any response from them, send follow-up mails or call again later.
What other things may Goodwill letters remove?
On minor issues like late or missed payments, these letters are more effective. Apart from that, a Goodwill letter might occasionally help remove other negative marks from your credit report. A consumer may remove closed accounts, charge off accounts, and paid collections through this letter.
However, many lenders are prohibited from negotiating with consumers to have such accounts deleted in exchange for payment under their credit bureaus' agreements.
How can you get closed credit accounts off your credit report?
These letters can also help to remove closed accounts other than missed or late payments. Your score can increase if you successfully remove closed accounts with poor payment histories from your most recent credit report.
Removing closed accounts might not be difficult if you don't have any collections accounts, missed or late payments, especially if you have a clean history of on-time payments.
However, consumers must be cautious when requesting the removal of closed accounts. Closed accounts affect your score as long as they are on your credit report. These accounts may occasionally result in a decline in your score.
How can you get charge-off accounts off your credit report?
You can send your creditor a letter outlining your situation and requesting that they take the charge-off off your report. Hopefully, they will agree on the proposed goodwill adjustments.
If you've had a long-standing relationship with the original lender and still have other accounts maintaining good credit health, you might be more likely to receive a positive response and get this negative item removed.
How can you get paid collections off your credit report?
Through goodwill request letters, you might be able to have paid collections taken off your credit report, but success is not always guaranteed.
In the case of a collection account, you would clarify to the creditors the circ*mstances surrounding the debt's entry into a collection, how you resolved the issue, and demonstrate that the incident was one-time only. You must also show that you have built a solid credit history.
The decision to remove the negative mark off the credit reports is ultimately up to the creditor or lender, who may consider your request.
Where to send a Goodwill request letter
You won't locate a specific department to address your letter to because these letters aren't regarded as an official method of contacting a creditor, such as a credit card company. Instead, you should locate the creditor's address and send your message there.
You can most of the time locate this information online, but your monthly bill may also have a customer service address. Keep in mind that sending a letter via email, where it is more likely to get lost in the bulk mails, is not the best course of action. So, if you need to clean credit history, and maintain a good credit score, sending physical mail with accurate information would be your best choice.
