What Is a Goodwill Letter?
No matter how diligent you are with your money, there are a variety of unpleasant life events that can temporarily put a crimp in your credit, such as a medical emergency or a job loss.
To make matters worse, if you miss a credit card payment and it's more than 30 days late, it might be reported to the credit bureaus. One strategy to get back on track with your credit is to write a goodwill letter to a creditor. Let's take a close look at goodwill letters and when it's appropriate to try it.
Up ahead:
-- How to write a goodwill letter.
What Is a Goodwill Letter?
If you have otherwise stellar credit and you missed a payment, writing a goodwill letter is an option for you.
Is one late payment a big deal? Oh, yes, it is. Here's a quick credit score fact to clear it up: Your payment history is 35% of your FICO score. That's a lot, right? So, the way to have a credit score that's continually climbing skyward is to pay every bill on time.
Once a late payment lands on your credit report, your score will drop like a rock. The higher your score, the more you're penalized. On myFICO.com, there's an example of a woman with a score of 793. When she had a 30-day late payment on her credit report, her score dropped into the 710-to-730 range: a drop between 63 and 83 points!
So, if you have a sloppy payment history, don't bother with this strategy. But if you have a legitimate reason for your late payment and this is a one-time incident, sending a goodwill letter has a chance for success.
[Read: Best Credit Cards for Fair Credit.]
How to Write a Goodwill Letter
Don't write this letter until you've gotten your account back in good standing. Once you're back on track, here are a few things to keep in mind as you write your letter:
-- Turn on the charm. If you don't have that gift, then just be super nice. Negativity will kill your chances. Remember, you made a mistake, so a snooty attitude will not be a good look.
-- Get to the point. Acknowledge your mistake, and list the reasons why it happened. Point out that your credit history is excellent, and this was just one of those once-in-a-lifetime money mistakes. Whatever the reason, write with clarity and include details. You want the creditor to get a feel for what happened to you.
-- Explain your response to it. This is the part of the letter where you describe the steps you've taken to make sure a late payment won't happen again. For example, if you missed a payment because your automatic payment didn't go through, tell the creditor how you plan to confirm payment in the future.
-- Supply evidence. Anything that supports your case is a valuable addition to include in the envelope. For instance, if you had emergency surgery, include a copy of the medical bills that show the dates you were incapacitated.
[Read: No-Annual-Fee Credit Cards.]
Goodwill Letter Template
You'll need to customize this for your situation, but here's a sample goodwill letter that you can use as a guideline:
(date)
(your name) (your address)
Account Number: (your account number)
To (the name of the individual receiving the letter):
Thank you so much for your time. I know you're busy, so I'll get right to the point.
I'm writing because I noticed a late payment (include date and account number) on my credit report. Before this incident, I had an excellent payment history because I take my financial obligations very seriously.
Unfortunately, I made a mistake and missed a payment when (describe your situation) happened. But I've gotten my account back up to date, and my finances are back on track.
To make sure this never happens again, (describe the steps you've taken to fix the problem). I've included a (document/bill/receipt, if applicable) for your review.
Given my stellar payment history up until this point, I'm asking you to consider making a goodwill adjustment and removing the negative item from my credit reports.
I'm truly committed to paying my bills on time, and I feel this late payment isn't an accurate representation of my creditworthiness. I'd be grateful if you'd give me a second chance. Thank you so much for considering my request.
Best regards,
(Your name and contact information)
Do Goodwill Letters Work?
When your letter is ready, send it to your creditor. You can send a certified letter so there's proof it's been received. But you can also send the letter via email if you prefer. Whatever method you choose, be sure you make a note of when the letter was sent. If you don't get a response, follow up in two weeks.
[Read: Best Balance Transfer Credit Cards.]
Will your letter be successful? If your letter is carefully worded and your credit history previously had been excellent, it's possible. But you should know that creditors agree to abide by the consumer protection laws that require information reported to the bureaus to be accurate. This is one of the reasons it's almost impossible to get accurate information about collection accounts (and other negative information) removed from your credit report.
However, by saying that this one late payment isn't a true reflection of your financial status -- "isn't an accurate representation of my creditworthiness" -- your goodwill letter addresses the matter of providing accurate information. In effect, the negative item doesn't reflect your actual creditworthiness.
Now that your expectations have been tempered a little, if you have a good case, then give this a try. Even if the original response is negative, follow up and ask if there's any other information you can provide. Sometimes, polite persistence wins the day.
