“Pay-for-delete” is an unpredictable credit recovery practice and does not work 100% of the time. The process involves requesting the removal of a derogatory item from your credit report. It often involves paying a debt collector some or all of what is owed. People sometimes hire third parties who promise to work with debt collectors on your behalf. The strategy is risky and doesn’t always work in the consumer’s favor.
7 Things You Should Know About Pay-for-Delete
1. It Won’t Work with the Original Creditor
Pay-for-delete may work with a third-party debt collector but is unlikely to work with the original creditor. However, if you are already behind on your payments and your debt has been sent to collections, you may be able to request pay-for-delete.
2. It Only Works on Delinquent Accounts
Unpaid bills do not go to collections right away. It typically takes 180 days (6 months) for a delinquent account to go into collections. When creditors determine that pursuing payment on a delinquent account is not worth their time, they sell delinquent accounts at a discount to a collection agency.
Once the collection agency has taken over the debt, they will attempt to collect on it for a profit. They may be willing to accept a pay-for-delete offer if they believe there is no other way to prevent a loss or profit from the debt.
3. Debt Collectors Will Probably Say No At First
Debt collectors will often say no several times to dissuade you from pursuing a “pay-for-delete.” They may even tell you things that are not correct. Common refusals include:
“Our company doesn’t do that.”
That’s not 100% true. Collection agencies can ask the credit bureaus to remove items from a report. The practice is usually reserved for incorrect information. However, they can and will blur the rules if it ensures that they get paid. Remember, if a collection agency doesn’t receive any payment for a debt, then they take a loss. However, if they ask for too many pay-for-deletes, it strains their relationship with the bureaus. So they will put you off as long as possible.
The Fair Credit Reporting Act does not require collection agencies to report data or prohibit them from having data removed. So Pay-for-delete doesn’t violate any laws, but that doesn’t mean it is squarely ethical.
If you ask for a legitimate item to be removed from the report, then the collection agency is taking a risk to remove it.
“The credit bureaus do not allow it.”
This is partially true. The credit bureaus do not want correct information to be removed from a credit report simply because it has been repaid (either in part or in full.) Items are supposed to stay on the credit report for seven years. Agreements between debt collectors and the bureaus often state things like “paid in full collection accounts must not be deleted” and “do not delete paid in full collection accounts.”
However, the bureaus are very open to removing items with errors. So if the collection agency agrees to a pay-for-delete, they likely report a mistake to do so. If they do this too many times, they could lose reporting privileges with the credit bureaus.
4. Pay-for-Delete Requests Must Be in Writing
All pay-for-delete requests must be made in writing. You or the third party you have hired must send a letter to the collection agency requesting that they remove the item in exchange for payment.
The letter serves a few purposes and must include the following:
- Ask for validation of the debt because the debt collector has a legal obligation to prove that you owe it.
- Offer to pay them in exchange for the item being removed from the credit report.
- Make it clear that you have no intention of paying them unless they promise to remove the items from your credit report. Having the item marked as “paid” or “settled” is not an option.
- Present your offer as a business deal in which both parties benefit: they will not take a loss on your debt, and your credit score will recover.
The Collection Agency must validate your debt within 30 days of receiving the request. They will likely do this without approving the offer in writing, so you will have to follow up with them multiple times.
5. It Won’t Necessarily Save You Money
In your offer, you will agree to pay some or all of what is owed. If the debt is small, $500 or less, you might offer to pay the full amount. If it is larger, you can often pay a percentage of the debt, usually 25% or less. Finding the sweet spot for your offer can be tricky because it’s hard to predict what the agency will accept.
Even though debt collectors pay cents on the dollar for your debt, they will want to make as much profit as possible. Therefore, a pay-per-delete strategy focuses on having the derogatory mark removed from your credit report, so you may end up paying more to ensure this result.
6. It May Not Be Removed From All Credit Reports
If an item is successfully removed from one credit report, it may still appear on other bureaus reports. Therefore, the debt collector must ask each bureau individually to remove it, and they might say no.
It depends on the collector’s relationship, history, and agreement with the bureau.
7. Third Party Pay-for-Delete Services Have Mixed Reputations
Choosing a reputable third party to help with your pay-for-delete is difficult. The practice isn’t considered above board by most established financial service providers. In addition, credit repair companies and individuals that offer the service are often small and hard to research.
You can protect yourself by researching if the company is compliant with all current laws. For example, the Credit Repair Organizations Act (CROA) requires credit-repair organizations to comply with the following:
- Give you a written summary of your rights and a written contract that you can void within three days of signing.
- Disclose what services they can and cannot perform.
- Cannot take payment before promised services are completed
Alternatives to Pay-for-Delete
If you are eager to improve your credit score, pay-per-delete is not your only option. The first thing you should do is check your report for errors! Having errors removed is free.
You can also ask for the debts to be verified by the collection agency. However, they have a limited time to do so before you can legally request that the items be removed. Also, don’t discount the value of building your credit through good habits. Repairing your credit through daily mindful habits takes longer but guarantees results and can prevent more credit issues in the future.