Never allow a collection agency tell you they cannot delete a collection account from your reports. It’s simply not true. If they put it on your credit report, they can take it off. A pay for delete is when a debt collector agrees to remove a debt from your credit report in exchange for payment. While the credit bureaus frown upon these types of agreements, collection agencies have it in their power to delete collection accounts from reports.
Why a pay for delete agreement
Paid collection entries on your credit report do nothing to increase your credit score. Paid collections hold the same negative weight as unpaid collection accounts. Once lenders begin to use the latest version of the credit scoring model, FICO 9, people with paid collections will see an improved credit score. But until then, current and older versions of the FICO credit scoring model make no difference in paid or unpaid collection accounts — both are negative.
Deleting a collection account can increase your credit scores, especially if the collection account is recent. As a collection account gets older, FICO seems to give it less weight in terms of your credit score. The older a collection account, whether paid or unpaid, the less it factors into your credit score. In fact, when a negative account reaches 48 months or older it is no longer calculated into your credit score.
When to Negotiate a Deletion
A pay for deletion is a request made by you to the creditor or collection agency to pay a debt in full or an agreed upon percentage in exchange for a deletion of the account or trade-line. Before negotiating a deletion you may want to request debt validation with the collection agency to see if they can even prove you owe the debt.
Who Can Do a Pay for Deletion
Pay for deletions can be done with original creditors or collection agencies but they are more typical with collection agencies. Debt that has been purchased by collection agencies becomes less valuable the older it gets. Many collection agencies just want to collect a debt as quickly and as easily possible making a pay for delete agreement much more likely than with an original creditor. Some collection agencies will tell you it’s illegal to delete collection entries – what they don’t tell you is there are no legal requirements to report a debt to the credit bureaus at all. Keep in mind the furnisher of information can remove what they have instructed the credit bureaus to report.
Settle Collection Agency Debt for Less
There is a possibility you can settle your debts for pennies on the dollar. See How to Settle Debt with Collection Agencies. Some collection agencies will require you pay the full amount in order for them to delete the account. But keep in mind a debt collector who purchased your debt, paid pennies on the dollar for the debt — so why not benefit and settle the debt for less. But even if you have to pay the full amount in exchange for a deletion it can be worth it.
All Negotiations Must Be in Writing
All negotiations should be done in writing and all letters mailed via certified, return receipt. You must create a paper trail. Your correspondence serves as proof if you ever need to pursue a lawsuit for resolution of the matter or if the account resurfaces on your credit reports. Payment should not be sent before you have an agreement signed by the collection agency in your hands. Get a letter on company letterhead that spells out they will remove the debt from all three major credit-reporting agencies. Sample Pay for Deletion Letter.
Multiple Attempts May be Necessary
Pay for deletes are completely optional. Collection agencies are not required to honor your request. It is entirely up to the collection agency. You may have to make multiple requests before you even get a yes or no answer. If it’s really what you desire, don’t give up. Find the name of an executive, manager or CEO of the collection agencies and address your pay for delete request directly to that person. You may have a much better chance if you can get your pay for delete request in front of the eyes of a decision-maker instead of a lower-level account representative. You may even have to make follow-up telephone calls if you do not hear from them. Just remember once you get an agreement it must be formalized in writing. Don’t pay before you get it in writing.
The bottom line in paying off obligations should be to help your credit score. Lenders use credit scores to make credit decisions, such as the interest rate you get when you apply for a loan. It’s not a good feeling being denied for credit or unable to make big purchases like an auto or home due to poor credit scores. Good credit can save you money. There is too much at stake to simply pay-off a debt and get nothing in return, request a pay for delete. Keep in mind you may have to send a few requests before getting the response you want. Don’t give up!