My parents were in the middle of a long, drawn-out divorce when I left for college. My tuition got tied up in the legal battle. This led to a lot of confusion and ended with me leaving school early, holding a $10,000 overdue bill for tuition, room and board.
Over the course of six months, I paid off the entire balance. But even though the debt was paid off quickly, it still showed up on my credit report.
A few years later, I had a good credit score overall. But I was saving to purchase a home and wanted my score to be as high as possible so I’d qualify for a good mortgage rate. The tuition bill was the only negative line item.
That’s when someone suggested I try a goodwill letter.
What Is a Goodwill Letter?
A goodwill letter is a way to get accurate, negative line items removed from your credit report. The creditor who reports the negative line item has the power to remove it. So your goal is to write your creditor a letter that persuades them to do just that.
When a negative line item is removed from your credit report, it will likely make your credit score bump up. A higher credit score can improve your chances of getting approved for a loan, credit card, mortgage or even certain employment positions.
It’s important to note that if you find an error on your credit report, you shouldn’t write a goodwill letter. Inaccurate information can be disputed and then removed, which is an entirely different process.
How to Write a Successful Goodwill Letter
Most of the time, goodwill letters are not successful.
Here are the steps I took to draft a successful letter.
Your creditor likely only knows you as a number. The first thing you should address in your letter are the specifics of your situation. Be sure to include things like:
- Your account number
- Total amount of debt
- When the debt was due
- The date you paid off the debt in full
In my situation, I knew paying off $10,000 in six months was impressive given my income, so I stressed this aspect of the repayment. If you have similar circumstances, be sure to highlight them.
Explain your situation.
Goodwill letters are most successful when you went through an extraordinary circumstance and explain it. If your excuse is, ‘I knew I couldn’t afford to max out my credit card, but I just really wanted the new iPhone,’ you’re probably not going to be successful.
Extraordinary circumstances are things like divorce, job loss, natural disasters, domestic violence or economic abuse or unexpected medical emergencies.
In my situation, I explained why there was confusion around who would pay the bill, again stressing that once it became clear it was my responsibility I paid it off quickly.
At this point in your goodwill letter, you’re going to want to express regret for your late payments. You had every intention of paying on time — before that extraordinary circumstance popped up.
If you otherwise have a positive payment history with the company, you can bring that up here, too. Anything you can do to demonstrate financial responsibility helps.
Explain why you want the item removed.
Next, give a reason for wanting this line item removed. For example, maybe you need to purchase a car so you can get to work. But with the negative line item on your report, you can’t secure a car note at a reasonable APR.
By laying this out for your creditor, you’re letting them see how their help can change your life in tangible ways.
You can wrap up your letter by saying something along the lines of, ‘I hope you will consider removing this collection from my credit report as a gesture of goodwill,’ and thanking them for their consideration.
Provide supporting documentation.
If you have any documents supporting the claims in your letters, include them. For instance, if you lived through a natural disaster, any paperwork you can provide from FEMA or your insurance company may prove helpful.
You’ll also want to include a succinct record of your payments, including receipts or statements issued by the creditor.
In my case, I included a receipt of all payments and a printout of my financial record directly from the school’s website.
How Will I know if I’m successful?
I knew my school had removed the late payment from my credit report because they sent me a letter telling me they had. Your creditor may or may not notify you in the same way.
I followed up when I did my annual credit report check the next year. Sure enough, the late payment was removed from my report.
During the pandemic, you can check your credit report for free weekly, so you won’t have to wait an entire year to follow up. You could potentially even see the item removed before your creditor gets in touch.
What if My Goodwill Letter Is Rejected?
Your creditor is not obligated to remove accurate, negative line items from your credit report. You’re asking them to do it out of the kindness of their heart. Even after carefully composing my letter and making a good case, in the end I was lucky. Most goodwill letters are rejected.
If your goodwill letter doesn’t work, you’ll simply have to deal with the negative line item until it falls off your credit report, which typically happens after no more than seven years.
But if putting in the time to craft a compelling, one-page letter gives you a shot at changing your financial life years ahead of schedule, why not give it a try?
Brynne Conroy is a contributor to The Penny Hoarder.
This was originally published on The Penny Hoarder, a personal finance website that empowers millions of readers nationwide to make smart decisions with their money through actionable and inspirational advice, and resources about how to make, save and manage money.