Can a Creditor Remove a Late Payment?

A late payment on a credit report can impact an individual’s financial standing, as payment history is a significant factor in credit scoring models. A late payment is generally reported to credit bureaus when a payment is made 30 days or more past its due date. While such entries can remain on a credit report for up to seven years, there are specific circumstances under which a late payment entry might be removed. Although removal is not guaranteed, understanding the possibilities and appropriate actions can be beneficial.

Circumstances for Removal

Creditors may agree to remove a late payment entry from a credit report under specific conditions, often related to errors or exceptional customer relationships. One such circumstance involves a clear error on the creditor’s part, such as misapplying a payment to the wrong account or experiencing a technical glitch that prevented timely processing of a payment that was indeed submitted by the due date. In these situations, the reported late payment is inaccurate, and the creditor has a responsibility to correct the error.

Beyond errors, some creditors may consider removing a late payment as a gesture of goodwill, particularly for customers who have a long history of on-time payments and the late payment is an isolated incident. This is more likely to occur if the account is otherwise in good standing and the customer demonstrates consistent financial responsibility. The creditor might view this as a way to maintain a positive relationship with a valued customer.

Negotiated agreements, sometimes referred to as “pay-for-delete,” represent another, albeit rarer, scenario where a creditor might agree to remove a late payment. This typically involves the consumer offering to pay a delinquent debt, or a portion of it, in exchange for the removal of the negative mark. It is important to note that creditors are not obligated to agree to such terms, and agreements of this nature are not legally binding on the creditor to remove accurate information.

Additionally, a creditor might be compelled to remove an entry if it violates fair credit reporting laws, such as the Fair Credit Reporting Act (FCRA). If the reported information is found to be inaccurate, incomplete, or unverifiable, the FCRA mandates that it must be corrected or removed from the credit report. This legal obligation ensures the accuracy and fairness of consumer credit information.

Strategies to Request Removal

Consumers can employ several distinct strategies to formally request or challenge a late payment entry with a creditor. One common approach is the goodwill letter, which is an an informal request for leniency. This letter acknowledges the late payment but explains any extenuating circumstances that led to it, such as a medical emergency or temporary financial hardship, while emphasizing a history of timely payments and overall good account standing. The purpose of a goodwill letter is to appeal to the creditor’s discretion based on the consumer’s otherwise reliable payment behavior.

Another strategy involves attempting to negotiate a “pay-for-delete” agreement directly with the creditor. This approach is typically considered when there is an outstanding balance associated with the late payment. The consumer offers to pay the debt in full or a negotiated settlement amount, contingent upon the creditor agreeing in writing to remove the negative late payment entry from their credit report. This negotiation often requires persistence and an understanding that creditors are generally hesitant to agree to remove accurate reporting, as it could set a precedent.

For instances where the consumer believes the late payment was reported in error, disputing the inaccuracy is the formal process. This involves notifying the creditor, and often the credit bureaus, that the information is incorrect. The dispute process requires the creditor to investigate the claim and verify the accuracy of the reported payment. If the creditor cannot verify the information or finds it to be erroneous, they are required to correct or remove the inaccurate entry.

Information to Prepare for Your Request

Before initiating any request for late payment removal, gathering specific information and documentation is an important preparatory step. Begin by collecting all personal and account details, including your full legal name, current address, the complete account number associated with the late payment, and the precise name and contact information of the creditor. Having this foundational information readily available ensures your request can be accurately identified and processed.

Next, compile detailed information regarding the specific late payment itself. This includes the exact date the payment was due, the date it was actually paid, the amount of the payment, and the specific month or billing cycle the late payment occurred. Clearly understanding these details will allow you to present a precise and undeniable account of the event.

Articulating a clear reason for your request is also necessary. Whether it was an isolated incident following a long history of on-time payments, a period of temporary financial hardship, or an alleged error by the creditor, having a concise explanation is important. This explanation provides context for your request and helps the creditor understand your situation.

Supporting documentation can significantly strengthen your case, depending on the nature of your request. For a goodwill request, evidence of a long-standing positive payment history with the creditor, such as account statements showing years of on-time payments, can be helpful. If you are disputing an error, bank statements, canceled checks, payment confirmations, or any correspondence that proves the payment was made on time or that the reporting is incorrect, are invaluable. Finally, clearly state your desired outcome, such as the removal of the specific late payment entry from your credit report.

Submitting Your Request and Monitoring Progress

Once all necessary information and documentation have been gathered, the next step involves submitting your request and diligently monitoring its progress. For formal disputes or critical communications, sending your request via certified mail with a return receipt requested is often recommended. This provides a legally verifiable record of when your letter was sent and received, which can be important for dispute timelines. Some creditors may also offer online portals for submitting disputes, which can provide immediate confirmation of receipt. For goodwill letters, standard mail or even an email might suffice, depending on the creditor’s preferred communication methods.

After submission, it is important to maintain meticulous records. Keep copies of all correspondence you send, including the letter itself, any supporting documents, and the certified mail receipt. Also, document the date of submission and any reference numbers provided. This organized approach ensures you have a complete paper trail should any follow-up become necessary.

Creditor response times can vary; for formal disputes under the Fair Credit Reporting Act (FCRA), creditors typically have a specific timeframe, often around 30 to 45 days, to investigate and respond. Goodwill requests, being informal, do not have a mandated response time and may take longer, or may not receive a direct response unless the request is granted. Setting realistic expectations for a response timeline can prevent unnecessary anxiety.

Regularly checking your credit reports from all three major credit bureaus—Equifax, Experian, and TransUnion—is essential to verify if the late payment has been removed. Consumers are entitled to a free copy of their credit report from each bureau once every 12 months, which can be accessed through AnnualCreditReport.com. If no response is received within a reasonable timeframe or if the request is denied and you believe an error persists, follow-up communication or further action, such as filing a complaint with the Consumer Financial Protection Bureau (CFPB), might be warranted.

Citations:

https://www.consumerfinance.gov/consumer-tools/credit-reports-and-scores/disputing-errors-on-your-credit-report/
https://www.consumerfinance.gov/ask-cfpb/how-do-i-dispute-an-error-on-my-credit-report-en-314/
https://www.consumerfinance.gov/consumer-tools/credit-reports-and-scores/
https://www.annualcreditreport.com/index.action