Should You Do a Pay for Delete?

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Pay For Delete
HIGHLIGHTS
  • Monitor your credit report regularly.
  • Use the Credit Reporting Agencies on-line forms to dispute inaccurate items. Accurate information drops off between 7-10 years.
  • Be careful of pay for delete offers. They could be collection scams.
  • Know your rights under the FCRA and FDCPA.

Should you Pay to Clean Up Your Credit Report

Negotiating with a collection agency to pay off a debt, in exchange for removing the item from your credit report, is referred to as a pay for delete. Should you pay to get rid of accurate items from your credit report? According to the Federal Trade Commission (FTC) a government regulator in charge of guarding your consumer rights:

“No one can legally remove accurate and timely negative information from a credit report. The law allows you to ask for an investigation of information in your file that you dispute as inaccurate or incomplete. There is no charge for this."

Anyone who checks their credit report knows that the report contains an abundance of information. Account history, such as a record of your: mortgages, credit cards, student loans, auto loans, and other retail credit make up a large part of your credit report. Your report also contains information about your employment history, where you lived, and basic personal information, such as your name, current address, and Social Security number.

Mistakes happen. To help you spend your time and money in the best manner, so you clean up your report cheaply and efficiently, you need to learn about:

  1. Mistakes and Errors on Your Credit Report
  2. Deleting Accurate, Negative Items
  3. Deal With Debt Problems

Mistakes and Errors on Your Credit Report

Your credit report is a snapshot of your past credit history, both positive and negative. Negative information includes late payments, charge-offs, third-party collection accounts, public judgments, bankruptcy, foreclosures, and other actions that reflect poorly on your past behavior.

Make sure that you monitor your credit report. You are entitled to a free credit report from each of the major three Credit Reporting Agencies (CRAs) once every 12 months. You can get your report, which does not include your credit score, from AnnualCreditReport.com. You may want to stagger your free reports, getting one every four months from one of the bureaus, so you can follow what’s listed more frequently. Keep in mind that the information can vary from report to report, so be sure you monitor all of them.

Pay attention to errors pertaining to social security number, address, and billing entries. Here are four typical reasons MyFICO.com gives for credit mistakes, as follows:

  • “The person applied for credit under different names (Robert Jones, Bob Jones, etc.).
  • “Someone made a clerical error in reading or entering name or address information from a hand-written application.
  • “The person gave an inaccurate Social Security number, or the number was misread by the lender.
  • “Loan or credit card payments were inadvertently applied to the wrong account.”

If you find errors or inaccurate information, then make sure that you file a credit dispute with the CRA. Identity theft is another issue that causes problems on a credit reports. Check your report regularly for accounts that you never opened and for any suspicious activity on active accounts. If you suspect that you’re the victim of identity theft, contact your creditors and the credit bureaus immediately.

Quick Tip: Avoid paying to delete inaccurate information by reading this Bills.com credit repair article.

Deleting Accurate Negative Information From Your Credit Report

In addition to inaccurate, negative information, your credit report may also contain accurate, negative information.

Wouldn’t it be nice if you could just erase past mistakes, push the delete button, and, presto, your record is clean. The good news is that your negative history is not permanent. In general, according to the Fair Credit Reporting Act (FCRA), negative items remain on your credit report for between 7 and 10 years. For more information about the FCRA law and the period negative items remain, read the Bills.com article about the FCRA.

Some collection agencies accept a negotiated settlement. The settling of the debt will cause a change of the manner the debt is recorded, from a collection/charge-off to a $0 balance, along with a notation that the debt was “paid in full,” or “settled for less than the amount owed,” or something similar. Paying off a collection item with a collection agency will not cause the debt to be re-aged. The 7-year clock does not start running anew, when you make a payment. Instead, the account will fall off based on the original 7-year period. Although you may be able to make your payment contingent on a deletion of the negative account, or a pay for delete, this strategy is in violation of the FCRA, which does not allow for elimination of accurate information.

Don’t confuse the the statute of limitations on debt with how long the debt can appear on your credit report. They are separate issues entirely.

Quick Tip: Before you take out a mortgage, you will need to pay off debt that is in collection status. Make sure you review your credit report before taking out a loan. If you see an account that does not belong to you, then dispute the item. Some scrupulous creditors attempt to put bogus items and then accept a pay for delete. Report any unfair actions taken by creditors to the FTC.

Pay For Delete? Or, Pay Your Debt?

Whether you are dealing with inaccurate items or negative, accurate accounts, think twice before you pay money to delete items from your credit report. Make sure that your debt is real and validated. Check to see if the statute of limitation (SOL) expired, so you don’t pay a debt that you are not legally obligated to pay.

Quick Tip: The steps described here should correct false information appearing in a credit report. However, if the consumer credit reporting agency does not delete or correct the false information, see the Bills.com method of verification article describing the next steps you can take to fix your credit report.

Don’t fall prey to fraud and pay debts that you don’t owe, just to remove an item from your credit report.

The good news is you can improve your credit score and credit record. Negative items become older and have less impact on your score as time passes. After 7 years (for most items), bad accounts drop off your report, so you can build up a positive, clean report.

If you are dealing with delinquent debts, charge-offs, and collection items, then you need to take appropriate steps to improve your situation. Use a two-pronged approach: attack your debt first, bringing all your debts down to a $0 balance, then work on building and maintaining good credit habits. If you need help to get out of debt, investigate the different debt relief options, including credit counseling and debt settlement.

Instead of paying to delete items, create and maintain a household budget, keep your debts under control, and practice good credit habits. It may take some time to build your credit score, but even the worst credit can usually be brought into very good to excellent range within two years.

Quick Tip: If you have debt problems, then use the Bills.com Debt Coach to get a personalized debt relief solution that fits your financial situation.

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Comments (107)


Jason W.
Middleburg, FL  |  June 21, 2013
Can my debt be assigned to multiple collection agencies? I swear I have an old Capital One card and 3 different collection agencies have sent me letters. What do they expect, for me to pay all 3 of them? Ha ha.
Bills.com
June 24, 2013
The next time a collection agent calls regarding this account, ask for his or her employer's company name and mailing address. Then send the collection agent a validation request stating that you dispute the validity of the debt. A debt that cannot be validated may not be collected.
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Jason W.
Middleburg, FL  |  June 26, 2013
I don't dispute the debt. It's about a year old and I expected to receive letters from a debt collector. But what is odd to me (but could be normal) is this same card has resulted in 3 separate collection agencies trying to collect. All different company names and internal file numbers, but the amount is the same and referenced card number is correct. I just found it odd. Does this mean Capital One sold the debt or assigned the debt to 3 separate companies in the hopes I would just pay 1 of them? Seems strange.
Bills.com
June 26, 2013
This is not uncommon, but also not intentional. Creditors have different triggers that dictate where/when an account will be assigned or reassigned and sometimes these triggers overlap and send the same file different places.

Take these two actions:
  1. Call Capital One and learn where this account is supposed to be officially. This may take a couple of phone calls and a few escalations but eventually someone will be able to say it is assigned to "x" collection agency.
  2. Check AnnualCreditReport.com to see if one, two, or three of these entities are reporting on the same account number. It's unlikely, but worth checking out as this could have adverse effects, obviously, on your credit. If this is the case you simply need to file a dispute with the credit bureaus regarding whichever entities are not supposed to be collecting on the account.
Jay C.
Pensacola, FL  |  May 20, 2013
I have 3 reports on my record that total just under $2,000. These charges are from misdemeanor court cases when I was 19 years old. I am now 22 years old and I have the money to pay off these collections, but I am wondering should I ask for a pay for delete or just pay it off?
Bills.com
May 21, 2013
If the information is correct, then it will drop off your credit report after 7-10 years. I recommend that you deal with the creditor and then check your credit reports to make sure that the items are updated to reflect that they have been paid off. Your credit score has already been damaged by the collection items. Now, concentrate on building up your credit.
Justin R.
Saint Augustine, FL  |  March 29, 2013
Do you have any advice for where to send these letters? I have two accounts I would like to attempt a Pay for Delete for but I don't want to waste the expensive postage (Certified letter, return receipt, etc.) by sending it to the wrong department. I have the last address for where to send payments but I fear that isn't the best place to send it. Should I address it to the standard corporate headquarters address of these big banks? Thanks so much and great write up!
Robert B.
Chowchilla, CA  |  March 17, 2013
I have an account that just hit collections. I pulled my credit report and the debt is still showing with the OC. Who would you recommend I deal with to get debt resolved? Debt is valid, I ran into some tough times and now have the ability to pay off the debt. What would be your recommendation in handling this issue?
Bills.com
March 18, 2013
The reports you see at the big-three consumer credit reporting agencies — Equifax, Experian, TransUnion — will show a lag of 30 to 90 days for changes in collection account ownership. Contact the original creditor and ask if it still has rights to collect the debt. If so, then negotiate a settlement with the original creditor. If the original creditor tells you your account is no longer in its records, then validate the debt with the collection agent. If it can validate the debt, then negotiate with the collection agent.
Bill T.
Clinton Twp, NJ  |  March 09, 2013
Thank you for an extremely informative site! I have just recently started downloading the 1st of my Free credit reports (staggered, of course!) and found 2 odd, old debts that are really hurting my score! One is from a years ago physical therapy office that had over-booked my prescription by a day or two then billed me for the overage that was not paid by my healthcare provider! What recourse would I have to challenge this? The other is also old, a $33.00 dollar debt that was from some Doctors office that I have never attended! That one is clearly a mistake and has really been knocking my score down, all the while I had NO clue they were even there!
Bills.com
March 18, 2013
Regarding the $33 erroneous collection account, file disputes with each consumer credit reporting agency that is publishing the error.

Regarding the unpaid physical therapy, let us assume you attended the physical therapy sessions. If so, then this really comes down to what the PT office promised when you started attending PT. Did they say something like, "We will work within your insurance plan to make sure you have minimal out-of-pocket costs?" Or was there no promises made by the PT billing office before you started PT? Regardless, you need to negotiate a settlement with the PT billing people to see this resolved.
John M.
Middleburg, FL  |  February 28, 2013
Where I keep getting confused is when you state a charge off is just an accounting term and the original creditor is still the debt holder and you owe them. If that is the case than where do these 3rd party collections companies come in that have purchased the debt for "pennies on the dollar"? Is it just an arrangement where IF they can get you to pay the debt (for less than owed) than the original creditor agrees to sell it to them for less than the total amount you paid? It's just odd because the arrangement SEEMS like the collection companies convince you to pay a sum that is much less (like you are getting a deal) and after you do the reality is the original creditor still owns the debt and you STILL owe them.
Bills.com
March 01, 2013
Great question. Collection agents work one of two ways:
  • Assignment: The original creditor sells, which is called assignment in the legal and collections worlds, a collection account to a collection agent or broker who sells the account to a collection agent. The original creditor has no rights to a collection account the moment it assigns the account to someone else. In other words, once it sells an account, it cannot later also attempt to collect that debt. Assignment is common for credit card collection accounts.
  • Contractor: The original creditor hires a collection agent to attempt to collect the debt. Here, the collection agent works on behalf of the original creditor, and is either given a target range for the amount it must collect, or must receive approval from the original creditor before it can negotiate a settlement for less than the balance due. Some credit card companies hire collection agents as extensions to their own internal collections team.

Consumers should get any settlement agreement in writing before making a payment, especially if they negotiate a lump-sum payment for less than the full balance. In the legal world, judges and lawyers look for certain magic words in contracts that have a particular meaning. The magic word here is "settlement," which in lawyer-speak is a final resolution to a debt in dispute. If a collection agent sends you debt resolution proposal that does not include the magic word, then keep negotiating to make sure the proposal is for a settlement and not some indeterminate payment plan. Also, keep a copy of the settlement contract, which should be on the collection agent's letterhead and signed by a person of authority at that company, in a safe place in case the collection agent later claims the contract was something other than a final settlement.

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John M.
Middleburg, FL  |  March 04, 2013
Ah ok so when an "Assignment" takes place the original creditor (Major Bank for example) has truly sold the debt to "XYZ Collections" and can no longer pursue you for the debt or actually take you to court and try to get a judgement against you? With that being said is a Pay For Delete attempt even possible at that point? If the original creditor has Assigned (sold off your debt) to another agency than how could they "forgive" your debt and accept the payment in full and delete the record from the reporting agencies?
Bills.com
March 18, 2013
Think of a collection account as a used car. When I sell my car to you and hand over a clear title to it, then I have no rights or liability for the car the moment I convey the title and vehicle to you.

If I'm an original creditor, and assign a collection account to you, I have no rights to the account.

When an account is removed from a consumer's reports, all of that collection account's history is removed from their credit reports.
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John M.
Middleburg, FL  |  March 19, 2013
Ok so even if a debt has been assigned to a collector it is still *possible* to negotiate a Pay for Delete. But who do you deal with? The collection agency or go back to the original creditor (Bank XYZ)? When you say in your car example about the title being transferred over does that mean the original creditor is no longer on the credit report at all if they assign the debt?
Bills.com
March 19, 2013
Creditors are required to report accurate information. It is a violation of the agreement that creditors make with the credit bureaus to delete accurate derogatory information, though it does occur. An original creditor is not bound by any agreement you make with a collection agency and can continue to report the derogatory information until 7 years after the date of your first delinquency.
Deric M.
Marietta, GA  |  October 25, 2012
Hi Bill. I wanted to ask a few questions. I currently have 2 credit card charge offs from 2008. One for $400 the other for $800. I have disputed these with the CRA's several times but they have came back verified. I plan to purchase a car within a few months and house in another year or so. I also have a paid tax lien showing on my report. Should I pay/settle these charge offs with the original creditors? Send a pay for delete letter? I've worked hard to remove a few other negative items off but these two particular charge offs will not budge. I need some advice
Bills.com
October 30, 2012
Charge-off is an accounting term and action, and is not the same as debt forgiveness or cancellation. A creditor changing the status of an account from current to charge-off does not change the legal status of the account, or the legal relationship between the lender and borrower. See the link I just mentioned to learn more.

The derogatory information will remain on your account for 7 years from the date of first delinquency.

Moving forward, focus your energy on building positive account history on your credit report.
Mary N.
Bismarck, ND  |  September 21, 2012
I have many credit cards that are almost up for the SOL. On the credit reporting agencies that say it will be off next year. My question is do I even attempt to do anything with them or leave them alone and they will drop off my credit report. Also I have one judgement on my record that will be off (SOL) in 2 years. I was wondering if it is even worth trying to settle with the judgement. Also I know settling the judgement will hurt my credit for a short time, but how long. If you can help not sure what to do. I have also read that they can make the judgement last longer than the sol. The judgement is only for 2000 dollars. My credit isn't too bad for everything that I still have on there. So should I mess with any of this or just wait....confused.
Bills.com
September 24, 2012
You have two major concerns to deal with: statute of limitations and your credit score.

SOL: Judgments are often renewable; therefore, don't assume that it will just go away. Beyond hurting your credit score you are also subject to wage garnishments, liens on your personal property, and bank levies. If your credit card debts do pass the SOL, without the creditor getting a judgment, then you will have to consider the financial cost of paying off the debt versus your needs and ability to get new credit. If you don't need new credit, then you might consider not paying the debt. However, many creditors will still pursue the debt and if sued, even after the SOL expires, you still need to make an affirmative defense in court.

Credit Score: There is no way of predicting how a payment on an old debt in collections will affect your credit score. Basically, the damage was done when your debt went into collections or a judgment was issued. However, over the long run, there is no doubt that your credit score will improve if you pay off old debt, continue to make timely payments, and create a now utilized diversified debt portfolio.
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Stefano R.
T/o Woodbridge, NJ  |  October 11, 2012
There are many financial tools that show you different ways to get richer and save huge. Just find the right tool and save big. The ones I like most is Smart Calculator and also Finance Tools on Bills.com.
Steve S.
August 11, 2012
What can be done after the original creditor has sold your debt off to a collections agency? I assume it might be 4 or 5 years before they do that because of course they want to collect what they can before that drop off window. But that would still leave you with a few years of really nasty stuff on your report. If they sold it do you have any kind of claim that they MUST delete the record since they no longer own the debt?
Bills.com
August 13, 2012
A derogatory item can remain on your credit report after charge-off. Charge-off is an accounting term.

As is stated above, the account can appear on your credit report for 7½ years from the date of first delinquency.
Jason W.
Jacksonville, FL  |  July 18, 2012
Only thing that confuses me in regards to Pay for Delete is how does this work when your debt has been CHARGED OFF or sold? I mean just as an example, if you owed XYZ Bank $10,000 over 5 years ago and now you want to send them a Pay for Delete letter, hasn't that debt already likely been sold to a 3rd party collection for pennies on the dollar? Or can you still pay the original creditor at anytime and hope it works? Because before they charged it off or sold it of course they reported tons of lates and such. If they agree to delete it then what do you do about the 3rd party? Try to make the same deal (pay the debt twice?) or just try to prove their claim on the debt is invalid?
Bills.com
July 24, 2012
Charge-off/write-off means much less than some people suppose or guess it means. Charge-off occurs when a creditor moves the collection account from its accounts receivable subsidiary ledger, back to the general ledger's bad-debt line. Charge-off does not mean the debt is cancelled or forgiven, or that the collection account has been sold or assigned to a collection agent. The fact the original creditor charged-off the debt does not change its legal right to collect the debt, or the creditor's legal relationship with the debtor.

If an original creditor hires a collection agent to collect a debt, it is still possible in theory for the consumer to negotiate with the original creditor. However, if the original creditor sold the collection account to a collection agent, then it is pointless for the debtor to attempt a negotiation with the original creditor because the original creditor has no rights or claim to the collection account.

If the original creditor sold the collection account to a collection agent, then the consumer should negotiate a settlement with the collection agent or seek a debt relief option best suited to their needs.
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Jason W.
Jacksonville, FL  |  July 29, 2012
What is the purpose of the wording "this letter is not an acknowledgment nor an acceptance of the debt" in the sample letter? If you are mailing the original creditor about YOUR debt that you have all the details about than how can the letter be anything but complete acceptance and acknowledgement?
Bills.com
July 31, 2012
In law as in other specialized fields, some ordinary-seeming words carry meaning within that field. For example, in carpentry, a square, level and brad are specific items even though outside of carpentry they are generic terms.

Depending on a state's laws, discussing a debt settlement with a creditor may reset the statute of limitations on the debt. Therefore, the letter template we offer contains the language you mentioned to to prevent a creditor from resetting the statute of limitations on the debt. It also insulates the letter writer from liability in cases where the debt is not their own. You are free to edit the language in the letter as you see fit according to your circumstances.
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Jeff T.
Wichita, KS  |  December 20, 2012
My ex-wife and I divorced in 2011, we have a house together, even though both of our names are on the mortgage. The judge awarded her the house, but to make a long story short. There is no further consideration due from her to me with regard to the real estate. She agreed to hold me harmless with respect to all expenses related to ownership in the house including the mortgage lien, property taxes, homeowner's insurance and other costs. With regard to costs, she holds me harmless and indemnifies me. I shall execute a deed transferring to her my entire interest in the real estate. In the event she is unable to refinance within 90 days the house shall be listed for sale immediately.

She hasn't paid the mortgage on the property for the last 180 and this is really messing up my credit score. With the court order my signature, her signature, both our attorneys signature and the judge's signature, could I get that derogatory deleted from my credit report?
Bills.com
December 21, 2012
Your question about an ex-spouse defaulting on a joint mortgage is, unfortunately, one we see often.

The agreement you and your ex-spouse signed binds both of you, and not third parties. Her written promise to hold you harmless for any consequences resulting from her ownership of the property has no meaning to the consumer credit reporting agencies because your divorce does not change the rights of the mortgage lender. Once you, your then-spouse, and the lender signed the mortgage, all three of you were subject to its terms and conditions. I have not seen any home loan contract with a "If we break up the one who moves out is released from this loan" clause.

Married or not, together or apart, once borrowers sign a joint loan contract they are jointly and severally liable for the contract. No divorce decree I have seen ever changed a home loan contract.
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