Collection debts can happen to anyone, and the reason could be an unpaid debt or a difficult financial situation. However, they can hurt your credit. But fret not since there’s a way to get them removed and reverse some of their negative impact with pay for delete.
This tricky strategy may not work each time, but you could see your credit improve by successfully negotiating a pay-for-delete arrangement. Before opting for this process, read this blog to make sure you understand how it works.
What is pay for delete?
Accounts sent to collections typically stay on your credit report for seven years from the date of first delinquency. Although, more recent accounts cause more harm to your score than the older ones.
Collection agencies are liable to report accurate and complete information to the three major credit bureaus, Equifax, Experian, and TransUnion. Perhaps, the reason why pay-for-delete isn’t considered totally above board and credit reporting agencies strictly discourage the practice.
But pay-for-delete isn’t expressly prohibited under the Fair Credit Reporting Act, so some debt collectors will still offer this option.
What is pay for delete letter?
Borrowers can either call or send a formal request letter known as a pay-for-delete letter to the collection agency.
Make sure that you state your offer clearly about repaying all or a part of the debt in exchange for getting the account removed from your credit report in your letter.
Then, it is up to the collection agency to decide whether to remove the account as requested.
Unfortunately, a pay-for-delete letter doesn’t have any legal implications, meaning the collection agency can take your payment and still refuse to remove the account from your credit report.
Possibly, this is why you should request a written confirmation from the collection agency mentioning they are willing to have the account deleted before you pay them.
How does pay for delete impact your credit?
Missing your payments can negatively affect your credit score, but if an account is sent to collections, your score can drop by up to110 points. Also, the higher your credit score, the more points you are likely to lose.
However, don’t forget that the impact of pay-for-delete on an individual’s credit score varies based on their overall credit profile. For instance, borrowers with multiple accounts in collections are less likely to see any significant increase in their score with just one negative remark removed from their credit report via pay per deletion.
You may see an increase in your score if you have a single account in collections and the debt collector agrees to remove it from your credit report.
Should you try to pay for delete?
Here’s why it’s not good to rely on pay-for-delete exclusively when you’re trying to improve your credit score.
- The process is discouraged. – The strategy exists in a gray area but isn’t prohibited under the Fair Credit Reporting Act. Only incomplete and inaccurate entries can be removed from a consumer’s credit report and not the accounts paid in full. In other words, pay for delete letters doesn’t carry any legal weight, so you can’t count on them.
- The debt collector might not guarantee anything. – Debt collection agencies usually only care about receiving payments on collections, so there’s no guarantee they will remove the account from your credit report.
- The account won’t disappear altogether. – Credit bureaus can report pay-offs or correct errors, but it is unlikely for them to delete the entire collections account. That’s because the debt collector can’t delete negative remarks reported by the original creditor.
- The process may not increase your credit score. – Each credit scoring model treats collection accounts differently, and some scoring models like FICO Score 9 and VantageScore 3.0 ignore them entirely.
What are the alternatives?
Consider these three alternatives before resorting to pay-for-delete:
1. Dispute any errors
Pay-for-delete may not be the best move, but disputing errors on your credit report is. If a collection account is on your credit report in error, taking steps such as credit repair can help you deal with mistakes.
You can submit a dispute to each credit bureau, and once the investigation is complete, the bureau indicates whether they have deleted, updated, or verified the disputed item.
2. Request debt verification
According to the Fair Debt Collection Practices Act, debt collectors are liable to send borrowers a debt validation notice that summarizes the details of the account within five days of the collector’s first contact with the borrower.
You can submit a debt verification letter requesting that the agency provide account details if the collector fails to send a validation letter.
3. Wait it out
Accounts sent to collections fall off your credit report after seven years from the date of the first delinquency. Although these accounts affect your credit score negatively, the impact decreases over time.
Consider letting these accounts remain on your report and wait for them to disappear on their own if you don’t have any plans to apply for a mortgage or a new credit any time soon.
Consider your credit situation as a whole before going the pay for delete route. Although, if one pesky past-due account is dragging down an otherwise clean record, pay-for-delete may be worth the shot for you.
Seeking the help of professionals like Cool Credit can give you some direction regarding the pay-per-deletion process.