The letters of credit carry out their purpose by acting as a substitute for the credit taken from any financial institution for a particular customer, to facilitate trade. Basically there are two types of letters of credit the first is the commercial and the second is the standby. The commercial letter of credit is the primary used for making payments for various transactions, whereas standby letter of credit is used for secondary mode of payment.

Letters of credit are useful tools which intend to help you to improve your credit score by removing the negative items from your credit reports. These letters are normally sent to the creditors and the collection agencies as an instrument to protect you from fraud and at the same time to judge the credibility of the creditor with respect to its right to get associated with your credit report. These letters of credit should always be sent by certified mail for future record. Letters of credit are of different types depending upon the use you need to put it in. The most important among them are the intend to sue letter, debt validation letter, letters to remove unauthorized hard inquiry from your report, pay for deletion letters, letter for account re-aging request, cease and desist letter and dispute letters to the credit bureaus to name a few. A letter of credit is in some way or the other related to removing the incorrect negative listings from your credit report thereby improving your credit score.

The use of some of the most important letters of credit is summarized below. Debt Validation Letter: Debt Validation Letter is normally sent to a creditor or a collection agency whose name appears on your credit report against a particular debt. A debt validation letter should always be send by certified mail and the creditor or the CA must validate the debt within 30 days from the date of receipt of your letter, else you are not liable for the debt to the creditor whose name appears on your credit report.

Pay for deletion letter:Pay for deletion letter is normally sent to the creditor or the CA after they have validated your debt. It is an agreement with the creditor by the borrower by which the creditor promises to remove the negative listing from your credit report once the debt has been paid in full. Dispute letters with the credit bureaus: A dispute letter is sent to the credit bureaus if you do not agree with certain negative listings in your credit report. When you send a dispute letter to the credit bureaus, the credit bureau verifies the listing with the creditor, and if they find the listing incorrect, they remove it from your credit report.

Cease and Desist Letter:If you find any debt collector disturbing you continuously over phone for collection of a particular debt which you do not owe, you can send a cease and desist letter to the debt collector.