In the process known as "pay for delete," debt collectors offer to remove a collection account from a consumer's credit report in return for the debtor making full payment on the account. This is not an entirely ethical method of operation. Debt collectors that send information to credit reporting companies may be required to give true and comprehensive information; thus, pay for deletion might be a murky area. In addition, the most recent iterations of credit scoring algorithms are starting to render the technique obsolete.

The Process Behind "Pay For Delete"

Pay for delete begins with contacting the debt collector via phone or writing and offering them the following deal: After you have paid off the account in full, the collector will pay any references to the account from your credit reports.

However, these kinds of agreements are unusual. Credit reporting organizations strongly discourage any effort to erase correct information from their reports and will take appropriate action if such an attempt is made. This is because, under the law, creditors that report to credit agencies must submit true and comprehensive information. However, they also have the option to choose not to submit any information. This places the activity in an ethically gray area, which has the potential to compromise the reliability of credit reporting.

Why The Practice Of "Pay For Delete" Is Becoming Less Common

The most recent versions of the FICO and VantageScore credit rating algorithms exclude collection accounts that have been paid in full. Even while the account is still included on your credit report, it is not having nearly the negative impact that it would have had you not paid the bill.

This indicates that the new formulae used in credit reporting essentially carry out the responsibilities of a "pay for delete" arrangement on your behalf. By settling the collections accounts, you may save yourself the hassle of negotiating such an agreement. You may pay a debt that is being collected in a few different ways. Most creditors are still using earlier versions of FICO, which is a major catch. Even while FICO 8 does not take into consideration collections that are less than $100, the version that mortgage lenders utilize does take into account all collections accounts.

For the time being, most collections accounts may be on your credit reports for up to seven years from when the bill first became delinquent, defined as being more than thirty days overdue. Even if you pay off an account that has been sent over to collections, a record of the paid collection will still be shown in your credit reports. Paying to have bad information removed from your reports, such as past due payments or any unfavorable remarks made by the original creditor, will not erase that information.

Sending Your Pay for Delete Letter: Some Tips and Tricks

• Make sure that the debt is yours and that the debt collector has the legal authority to collect on it before you make an offer to pay to have it deleted from a collection account. If your first interaction with the collector occurred within the last 30 days, you have the right to seek verification of debt by sending the collector a letter requesting debt validation. If the debt collector does not have adequate documentation to prove the debt, they cannot collect from you, including not reporting the debt on your credit report. However, if the debt collector has evidence and can deliver it to you, then collection activities may proceed as normal.
• For debts that are getting near the seven-year threshold, it may be preferable to wait until the credit reporting time restriction has elapsed before attempting to settle them. After the item has been removed from your credit report in the normal manner, it will no longer affect your credit score.
• You should only send the pay-for-delete letter if you can pay the whole sum after your offer has been approved. You may only have a limited time to pay a payment before the offer is revoked and collection proceedings are restarted.
• Send the letter and your follow-up payment by certified mail with a request for a return receipt. This provides evidence that both the letter and your money were shipped out and received by the appropriate party.
• Be sure to preserve a duplicate of the letter for your records, as well as if you decide to attempt using this method with a new creditor or collector.