Pay For Delete: Should You Do It?
Pay for delete services are something many credit users do not understand. The following is information on what pay for delete is, whether it’s for you (spoiler: it’s probably not), and how you can implement in your own life.
What happens when a collection agency receives my debt?
The collection agency generally passes along this information to the credit bureaus to notify them of the collection. This process will typically add a negative event to your credit report, which can lower your credit score. Your credit score will suffer even more if you don’t pay off the debt.
This information can stay on your credit report for up to seven years, but as time goes on, the negative information factors in less to your credit score.
What is Pay for Delete?
Pay for delete is when you offer to pay owed debt in exchange for the creditor removing the negative account history from your credit report. However, there are risks associated with it, and trying to do so is asking the debt collector to violate their contracts.
How common is pay-for-delete?
Roughly 10% of collection agencies will agree to pay for delete because they want to collect. You’ll probably have better luck with smaller, mom-and-pop collection agencies. Legitimate debt collection agencies will probably not engage in the pay for delete process.
What are the risks of pay for delete?
The risk lies with debt collectors. Therefore, there’s a big chance they will not do the pay for delete. The collectors that remove this information are actually not supposed to, according to their contracts with the three credit bureaus. They are required by law and by contract to send accurate information, so technically, pay for delete is not advisable.
How does pay for delete affect my credit report?
Collection agencies could delete the account associated with the collection. But it can’t delete anything from the creditor originally, including late payment information.
- Fully paid collection accounts will show as “paid collection”
- Fully paid collection accounts will no longer show a balance due
- It will stay on the credit report for seven years from the original delinquency date
Scenarios where you can pay for delete
You never received a notification of debt
If you never received a bill, you have a chance at using pay for delete. For example, if the bill was sent to the wrong address, you have grounds for an argument that the collection shouldn’t be on your credit report. Just make sure you pay off any other debts before doing so.
The collection is from medical debt
The new FICO scoring model called FICO 9 has lower weighting for medical collections. It also doesn’t take into account paid medical collections.
- By law, medical debt doesn’t factor into your credit score as much as other types of debt. The idea is that medical collections don’t give as much information about a consumer’s credit risk.
- However, the new credit score models aren’t widely used yet
- Nonetheless, it’s now more probable that medical debts will be deleted from your credit report after they are paid off. Be sure to ask your debt collector if you’re dealing with medical debt.
You’re not dealing with a large creditor or bank
If the creditor that you originally owe money to is not a large creditor, pay for delete may work with a wide variety of bills (dental, phone, utilities, medical, rent).
- If there’s a credit card bill you never paid for, there’s a very low chance that you’ll be able to pay for delete for it. It’s near impossible to negotiate that with a very established credit card company.
- You may have better luck if you are dealing with a smaller creditor, and working with a different type of debt
Practical Pay for Delete Rules of Thumb
Ask the original creditor
- Communicate with the creditor to ask if your debt has been sent to a collection on contingency. What this means is that an agency is able to get a percentage of funds that it collects, even though the original creditor still technically has the debt.
- Ask if it’s possible to just pay off the original creditor’s debt directly, without the collection agency
- The collection will no longer be in your credit report if the debt is no longer in collections
Contact the agency
Communicate with the collection agency:
- State to the agency that you intend to pay off the debt
- Afterwards, request to have your credit report cleared by having the collection removed
- It can help to be polite in your communications and try to work with them as best as possible
Have ample proof
Having ample proof and a good trail of evidence in your communications is particularly important if there’s a special circumstance surrounding your removed collection. Ensure that you can back up your statements to the debt collector with ample proof
Get it in writing
This is related to having ample proof. You’ll have a strong case if communication is in writing via mail as opposed to hearsay memory over the phone.
- In case the collection agency agrees with you to delete the collection in exchange for a payment on your end, make sure you ask them for a letter that states this agreement before giving them any money. Don’t pay for anything until you both have agreed to the terms, and it’s in writing.
- In case the debt collector doesn’t want to mail a letter, email generally also works as evidence
Some Final Things to Remember and Know
- Paid and closed positive accounts will be on your account for 10 years
- Open accounts that are in good standing will stay on your account indefinitely
- Collections can legally stay on your credit report for up to seven years from when the account became delinquent
- Paid collection accounts will not be removed from your credit report
- If there is a negative account that’s on your credit reports from all three bureaus, removing it from just one bureau may not actually lead to much effect. And it won’t necessarily change the report from the other two, either
- Because of this, you should verify if the information will get sent to all three bureaus or just a subset
Even if you’re not able to get an agreement for pay for delete, it’s good to just pay off the debt anyway. It’s going to be better for your credit report and credit score to have the collection as paid as opposed to not. More recent credit score models for the FICO and VantageScore don’t count any types of paid collections. After paying, you should soon see an updated credit report that shows that you’ve paid.