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How to Use a Goodwill Letter for Credit Enhancement

goodwill letterHow to Use a Goodwill Letter for Credit Enhancement

If you are told your credit score is too low, you have to quickly make a choice:  is this OK with you, or do you want to fix it.  I mean to say, you have  to take action, with absolute decisiveness; you have to stand up and make it the time to do something.  And sometimes you have to ask for forgiveness.

In certain situations, we may be able to fix credit with a goodwill letter.  Take this for example: let’s say you have been a Lowe’s or Home Depot  customer for years, and a few years back you took out a credit card to take advantage of 6 months of no interest or 20% off purchase or whatever.  Imagine you paid your  bill timely for several years and then you had some health or family problem that really got you off track.  Let’s say two months went by without you making a payment, but since then you have been on time – however, with one or more 30 or 60 day late items hurting your credit report.

SquirrelThis could be a big problem to you if you were applying for a mortgage.  Now mortgages can be qualified for with scores as low as 560 (for FHA to 560 click here), but let’s continue our example by saying your credit score is 717.  A 717 is a fine score, but actually 2 pricing bands behind a 740 credit score.  This could mean up to a .25% price increase to the interest rate you qualify for.  On a $300,000 home loan in today’s market, the cost would be around $50 per month.  That’s for 30 year mortgages.  But 23 points to your credit score could solve this problem for you.

If you need a free copy of your credit report, click here, or contact me with any questions regarding credit scores and credit reports.

This is the kind of situation where a goodwill letter would work effectively.  The basic idea is about asking for forgiveness from the creditor.  You can try a goodwill letter for anything, but it will work best in the cases where you have 3 to 12 months of good payment history following the report of late payment.  It is important that the creditor wants to maintain a good relationship with you.

You are dealing with real people at the other end, so a humble approach with a polite request serves the purpose.  There is no guarantee for success, but a goodwill letter is so easy to write and fast to mail out.  And they do work very often.  But it takes time.

Now if you contact me, I have three sample goodwill letters I can send you to create your own personalized letters.  Or if you are in an extreme hurry, you can use them as your own.

  • It will be best if you can  write a genuine request about your own unique situation.
  • Give a good reason why it happened last time, how the situation has changed and why it won’t happen again
  • Give a good reason why you are writing right now.  Let them know you are buying a home and improving your situation.
  • It’s helpful you have been a loyal customer and wish to continue to be so for years to come
  • Take responsibility for the Late Payment.  Mention you should have been more careful and don’t apply entire blame on the situation

Now, let’s go back and I’ll give the number one rule:

Don’t write a goodwill letter for a payment you know is late but is not on your credit report.  Sometimes a creditor may not report a late payment at all.

If you need a free copy of your credit report, click here, or contact me with any questions regarding credit scores and credit reports.

Best Practice: Start the process early and invest in yourself the time necessary to maximize your scores.

Copyright 2014 John Regur All Rights Reserved – Originally Posted at: Tulsa Oklahoma Mortgages – John Regur

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