What Is a Goodwill Adjustment?

When you miss a payment on one of your debts like a mortgage, your credit score can drop by as much as 110 points. But you can lessen the blow of a missed mortgage payment by writing a goodwill adjustment letter, which is a way to ask a lender to remove a black mark from your credit reports.

In this guide, we’ll cover:

• What is a goodwill adjustment?
• When should you write a goodwill adjustment letter?
• Elements of an effective goodwill adjustment letter
• How to write a goodwill letter to your mortgage lender
• Goodwill adjustment letter template
• The bottom line

What is a goodwill adjustment?

A goodwill adjustment is when a lender agrees to retroactively make changes to the way it reports a borrower’s account activity to the major credit reporting bureaus (Equifax, Experian and TransUnion). The changes can be related to the timeliness of payments or other details, and are intended to benefit the borrower in some way, said Bruce McClary, vice president of marketing for the National Foundation for Credit Counseling (NFCC).

For example, let’s say a borrower missed a loan payment and believes that one blemish is hindering them from moving forward on other credit applications. This is when a goodwill adjustment to remove a late payment can come in handy.

“(The borrower) can appeal to the lender to make an adjustment to the way that the account history is reported,” McClary said. “So even though they did miss that payment, that activity would be removed to help that person accomplish what they want to do, whether it’s applying for another loan, opening a line of credit or what have you.”

When should you write a goodwill adjustment letter?

The best time to write and submit a goodwill adjustment letter to your lender or creditor is before you to take any action that requires you to have a certain credit score or a credit report free of negative marks, McClary said. This may include opening a new line of credit or requesting a credit limit increase, for example.

“I would suggest that you reach out to the creditor before you move in that direction to ask them if they would make that adjustment in good faith, with the understanding that the information that shows is accurate — that you’re not disputing the accuracy of the information — but you have some things that you want to accomplish and that record as it stands is what may prevent you from accomplishing that goal,” he said.

Elements of an effective goodwill adjustment letter

Asking your lender to simply remove a late payment from your credit report likely won’t suffice — you’ll need to put some effort into your request. Here are some key elements of an effective goodwill letter, according to NFCC’s McClary:

• Honesty. Be forthcoming about the circumstances surrounding your late payment and the request you’re making. Acknowledge the accuracy of the information and make clear that you’re not disputing it.
• Modesty. Don’t ask for too much. If you’re looking to remove a late payment and other negative marks, such as exceeding a credit card limit, you might want to reconsider making this type of request.

You’ll also want to include basic information like your account number, contact information and mailing address. Print, sign and mail your letter; don’t email it.

Do goodwill letters work?

Your lender is not obligated to honor your goodwill adjustment request. Sending in the letter is sort of a gamble — there’s a 50/50 chance you’ll receive the outcome you’re hoping for.

“It’s likely they could say yes; it’s likely they could say no, and I think there’s an equal chance of either response,” McClary said. “Don’t set your level of expectations so high that everything in the world depends on them saying yes.”

Have a plan in place in the event your lender decides against making a goodwill adjustment to remove a late payment, he added.

It’s also important to be realistic about your track record as a borrower. If you’ve only missed one payment but have otherwise had a history of on-time payments, your lender might be more likely to consider approving your request than if you’ve shown an ongoing pattern of missing your due dates.

How to write a goodwill letter to your mortgage lender

If you’ve missed the grace period — often 15 days — and now have a late mortgage payment listed on your credit report, it might be time to write a goodwill adjustment letter to your mortgage lender or servicer.

The letter should include the elements listed above, but McClary suggests also incorporating details about your efforts as a homeowner, such as explaining:

• How you’ve taken every possible step to make your payments on time
• What you’ve been doing to maintain the condition and value of the property

“That shows the lender that you understand this is not just about dollars and cents and what you borrowed and what you pay back,” McClary said. “It’s about your stake of ownership in the property itself as an asset, and as collateral for the bank, and as an investment for you so that the things you’re doing are in the best interests of all parties.”

While including this information in your letter doesn’t guarantee your request will be granted, it can help your case.

Goodwill adjustment letter template

Below is a goodwill adjustment letter sample that you can download for inspiration when writing a letter to your mortgage lender. Copy the text of the goodwill adjustment letter template into your own document and customize it with your personal information.

The bottom line

Taking the time to request a goodwill adjustment can be beneficial for your credit history, but don’t feel like you’re entitled to receive a goodwell credit adjustment.

In fact, it might work well for you to be proactive before your lender reports a late payment to your credit profile. Reach out to your lender to ask about options if you’re starting to feel like you might miss a payment, McClary suggested, especially if you have a mortgage.

“There’s so much more on the line when you miss a payment, and you don’t want to put yourself that much closer to possible foreclosure if you are having trouble,” he said.

If you’re struggling to keep up with your mortgage payments, ask your lender about applying for a loan modification to make your payments more affordable, or mortgage forbearance to temporarily reduce or suspend your payments.