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How to Obtain a Pay for Delete

Pay For Delete
HIGHLIGHTS
  • Understand that old collection accounts can harm your credit score.
  • Review when you have increased leverage to obtain a pay for delete.
  • Know your rights under the FCRA and FDCPA.

How to Negotiate a Pay for Delete Deal

It takes effort to maintain a good credit score. Derogatory accounts bring down your credit score. Old accounts with an outstanding balance lower your score, even if it has been a long time since you’ve been contacted by the creditor or a collection agency. Old delinquencies and collection accounts do not stay on your credit report forever, but you may want to take steps to try and remove them, in order to improve your credit score.

One strategy you can use is to send a pay for delete letter to your creditor or the collection agency. It doesn’t cost anything to try and negotiate a pay for delete, aside from a little time and some postage.  It is worth making the effort to try to obtain a pay for delete, instead of just waiting for the derogatory account to fall off of your credit report on its own, as it takes 7 ½ years for an old account to disappear from your credit report, according to federal law.

Seven-Year Rule

Federal law (US Code Title 15, §1681c) controls the behavior of credit reporting agencies. The specific law is known as the Fair Credit Reporting Act (FCRA). Under FCRA §605 (a) and (b), an account in collection will appear on a consumer's credit report for 7½ years. The clock starts approximately 180 days after the date of first delinquency on the account. To determine when an account will be removed by the credit reporting agencies (TransUnion, Equifax, and Experian and others), add 7½ years to the date of first delinquency. Subsequent activity, such as resolving or settling the debt, is irrelevant to the seven-year rule. Certain debts are not covered by the seven-year-rule. For example, if the debt is a tax lien, that can appear for seven years from the date of payment. A bankruptcy will appear for ten years from the date of the final order. Delinquent federal student loans can be reported for as long as they are delinquent.

Pay for Delete Letter

Sample Pay for Delete Letter

Consider paying the debt with a condition, that the creditor or the collection agency deletes the account entry from your credit report. A "pay for delete" letter is an agreement between you and the creditor or collection agency. You agree to pay a debt that is listed on your credit report in exchange for the creditor or collection agency promising to delete the entry from your credit reports.

Some collections agents will honor these agreements -- others consider them a breach of contract they have with the credit reporting agencies and will not consider them. Some collection agencies claim that “pay for deletes violate federal law," as an excuse for not accepting them. This is either a misunderstanding of the federal Fair Debt Collections Practices Act and federal Fair Credit Reporting Act or is a misstatement of the law. Pay for deletes do not violate any federal law.

If your debt is still a collectible debt, you may not have a lot of leverage to get the creditor or collection agency to agree to a pay for delete. However, if the debt is relatively small, less than $1,000, for example, the creditor may not want to take the expense and effort to pursue aggressive collection efforts against you. This makes the creditor more likely to accept a pay for delete offer. If your debt is held by a third-party collection agency, it is likely that they paid only pennies on the dollar to purchase the debt. Not only may they be willing to accept a pay for delete offer, but you may be able to accomplish the pay for delete by offering to settle the debt for less than you owe.

In some cases, the debt may have passed the collection statutory expiration date, so that you have no legal obligation to pay the debt. Even in this case, the derogatory account may be harming your credit score, preventing you from qualifying for a loan or a good rate on a loan you seek. For example, a credit card debt in California has a 4 year statute of limitations (SOL). The SOL starts running from the time of your last payment on the account. After 4 years, you still have 3.5 years, due to the 7½ year rule that the debt will remain on your credit report. This is an ideal time to make a low-dollar offer to the collector or creditor, who has likely given up hope of ever collecting anything on the debt, and also to make receiving a pay for delete a requirement for any settlement.

If you have no income or significant assets or if the source of your income is one that a creditor could never touch with a garnishment (e.g., Social Security disability), then you also have increased leverage to negotiate a reduced payoff and a pay for delete.

Pay for Delete Letter Tips

  • Send your pay for delete letter by certified mail with a return receipt requested
  • Send your payment, if your offer is accepted, by certified mail with a return receipt requested
  • Make a settlement offer in exchange for a pay for delete only for an amount you can afford to pay immediately
  • Require that any acceptance letter from the creditor or collection agent is written on the creditor or collection agency’s official letterhead
  • Keep a record of all correspondence
  • If your offer is not accepted, send a debt validation letter. You can find a sample on the Bills.com Debt Do it Yourself page, under Debt Dispute Letter

Summary

If you have the cash to settle a debt immediately you have nothing to lose in asking for a pay for delete. Do not be surprised if the creditor refuses to consider your pay for delete offer -- they are under no obligation to accept them. However, it does not hurt to ask. Use any leverage you have, whether the debt has passed its SOL or if your income can't be garnished, in order to obtain the pay for delete.

Comments (76)


Parker W.
Tulsa, OK  |  April 24, 2012
I called DECA financial services today, and was able to negotiate a pay for delete on an old doctor bill. I paid in full (around $450) in exchange for them removing the claim entirely from my credit report. When I told them I wanted a written letter or email to state what was agreed upon before I would pay the bill, they said that is not something they do. That every call they take is on a recorded line to show the verbal agreement. They told me that of the delete is not shown on my credit report within the next 30 days, I could call back and speak with a supervisor who could listen to the call and have it rectified. All of that to say, I have two questions.
  1. I did go ahead and pay the debt in full over the phone, was that a mistake? Do I have any legal rights if they do not comply?
  2. And second, my credit score dropped about 90 points when they placed the collection on my report (from 730 to 638). What type of rebound can I expect if they do delete the collection from my credit report?
Bills.com
April 24, 2012
  1. Here's a nightmare scenario: DECA Financial Services takes your money and does not honor the spoken promise to delete the derogatory from your credit record. You call DECA, and ask for a manager. You get one on the phone, and, whoops, the automated recording system crashed and the record of your conversation is lost. The agent you spoke to no longer works for DECA, and the database entry for your account has no mention of a promised pay for delete. It's now your word against theirs — they have no record of the promise and neither do you. Lawyers like working with paper because a paper document can be misfiled, but whole filing cabinets are not lost to hard disk crashes or computer malfunctions.
  2. Rebound is difficult to predict because credit scores bounce around all of the time and for reasons consumers and other folks like us who work in this field do not understand. The best answer I can give you, and by no means is this a good answer, is found in the Bills.com article Short Sale, Foreclosure & Your Credit Score. This article shows how much a FICO score will drop for certain events, and the time to recovery for these events.

    Assuming my parade of horribles does not happen in my reply No. 1 and DECA honors its pay-for-delete promise, you may see an immediate bounce up to where your score was before. However, if this account was your oldest and set the baseline for your credit history, you may not see much upward movement. This is especially true if you have few remaining current tradelines.

Kimberly B.
Milton, DE  |  April 24, 2012
I have a very small bill ($98) in collections. I have no memory of ever receiving a bill in the mail or any phone calls from this agency. I guess there not very pushy. I don't even have an account number for this debt but it showed up on my credit report. I've sent a "pay to delete" letter but did not receive a response either way. This was over 30 days ago. What should be my next move?
Bills.com
April 24, 2012
If you do not remember the debt or creditor, it may be a debt put on your credit report by mistake. Therefore, a pay-for-delete should not be your first response to a mystery charge appearing on your credit report.

Instead, dispute the entry on your credit file.

Credit reports are far from accurate, and are not a legal record or ledger of a person's debts. In fact, many consumer debts never appear on a credit report, but that does not mean the debts are not owed. For example. a landlord may not report tenants' lease payments on a credit report. Some buy-here-pay-here car dealers ignore the credit reporting agencies, too, as do payday lenders. But all of those may be legal debts.
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Kimberly B.
Milton, DE  |  April 24, 2012
I do remember the creditor. It was a doctor and I do remember going to that specific doctor. But what about not getting any phone calls or letters telling me to pay
Bills.com
April 24, 2012
See the Bills.com Debt Do-it-Yourself page to find a sample cease communications letter.
Jessie M.
Washington, DC  |  April 20, 2012
Does a pay for delete request letter need to be signed or is typing the name sufficient? In addtion does the corresponder of the collection agency need to sign any letters sent back for it to be a legal document or can they just type their name?
Bills.com
April 20, 2012
It is not possible to answer your question "yes" or "no" without looking at the totality of the circumstances and the intention of the letter's author. For example, it is common in e-mail correspondence for a person to write "/s/ Person's Name" to indicate that "Person's Name" wanted to indicate a signature. Also, a person may write in the body of an e-mail, "Consider my signature is below" or similar language. It really comes down to intention, and the contract's surrounding facts.

I realize some will argue, with merit, that a handwritten signature is the only way a person can execute a contract legally. This is the case with some contracts, home loans for example, where lenders want a handwritten signature or will withdraw the contract.
Terry P.
Seattle, WA  |  April 19, 2012
I have a credit card through a credit union that apparently closed my account in Dec and opened an in-house loan. I was continuing to pay the credit card, knowing nothing about the loan, so it was charged-off a couple of weeks ago. I will have it paid in full by mid-May, but I am starting grad school in the fall and have applied for federal loans and will soon be trying for private loans to supplement. How will this charge-off affect these loans?
Bills.com
April 19, 2012
Federal loans are based on need and not a borrower's credit score. Private loans are based on a person's credit score and ability to repay the loan. See the Bills.com resource Short Sale, Foreclosure & Your Credit Score to learn more about how your recent hiccup may impact your FICO score.
Joseph Z.
Los Angeles, CA  |  April 08, 2012
I just received the debt validation for $10k from a debt collection agency. Is it in my best interest to negotiate a pay-for-delete? If successful, would I still maintain what's left of my credit score?
Bills.com
April 09, 2012
Depends on your goals and circumstances. Is the collection agent actively pursuing the debt? Do you plan to apply for a loan soon? If the answers to both questions are "yes," then a pay-for-delete knocks the debt out of your credit report and removes the liability. A pay for delete will, in almost all situations, maintain your present credit score or improve it.
Kristen S.
Salinas, CA  |  April 05, 2012
I had 16 years of impeccable credit, and last year suffered a financial hardship, which destroyed my credit. I finally got to a place where i can make the payments but it's all too late, I have 4 derogatory accounts (2 credit card, one medical and one pg&e) on my credit report. I checked my report and its all accurate, and I made payment arrangements with everyone (except medical bills which will just have to wait) and now i need to start rebuilding my credit. Which credit card company is best for offering a secured card? I have a charge-off account with Chase and they said i have to first apply for a card then ask for it to be secure. I know i wont get approved though, sounds like a catch-22? Also, can I do a pay for delete letter with pg&e?
Bills.com
April 06, 2012
I do not have a specific recommendation for a secured credit card. Bills.com offers a nifty tool to help you compare offers for secured credit cards. See the Bills.com Find Credit Cards page and in the left column, click on "Limited or No Credit History." Compare the offers to find the card that best meets your needs at the lowest cost. Tip: Avoid pre-paid cards if your goal is to build your credit score. Choose a secured card instead.

Regarding your question about PG&E, are you still a PG&E customer? If not, then give a pay-for-delete a try. If you are still a customer, I doubt you will find success in negotiating a pay for delete.
Avatar
Kristen S.
Salinas, CA  |  April 09, 2012
Thank you for your feedback. I have a few more questions: I'm not a customer with PG&E, but I will be again in about a month. Should I still try?

I have already set up payment arrangements with a collection agency and claimed the debt can I still do a pay for delete letter? Do i contact the collection agency for that?

I have a checking account reported in chexsystems, can I do a pay for delete with this?

I have some money to pay it off or one of my charged off accounts. Which would you recommend to pay off first?
Bills.com
April 10, 2012
I think your main question is, "I have enough money to try a pay-for-delete on one of three accounts. Which one gives me the biggest bang for the buck?"

I do not know, and I doubt anyone but an insider at Fair Isaac & Co., the maker of the FICO score, could answer that question with any certainty. I would focus on the most recent delinquent account, since that is probably the one causing the most damage to your credit score.
Steven H.
Roslyn Heights, NY  |  April 02, 2012
I would like to attempt a Pay to Remove on 2 credit card debts I have. The credit card company charged off the accounts and sold them to a collection agency. I have both the credit card company charge off and the collection agency notations on my credit report. Who should I send the Pay to Remove letter to? I'm concerned that if I send it to one of them, and they agree to remove, I'll still have the other negative notation on my credit report.
Bills.com
April 03, 2012
It sounds as if the collection agency is now the owner of the debt. In that case, you need to negotiate the pay-for-delete with them. That will not remove the original creditor charge-off, however. Once the debt is paid, you can try to use credit repair, on your own or with a professional, to remove the original account. That may or may not work. The original creditor is within its rights to continue to report the charge-off for 7½ years from your first delinquency.
Wade S.
Silvis, IL  |  March 23, 2012
I was overpaid by the government and was unable to make the payment for 5 months due to being laid off from my job. The full amount($824) was taken out of my tax return. My payment status says "Seriously past due date / assigned to attorney, collection agency, or credit grantor's internal collection department" since it has be paid is there a way to get it off of my credit report and once it shows up as being paid on my report will my score go up?
Bills.com
March 23, 2012
File a dispute with the credit reporting agency or agencies that display the information you believe to be in error. Your credit score with rise if the derogatory is removed.
Micheal L.
Manns Choice, PA  |  March 20, 2012
Hello I have 4 unpaid medical bills on my credit report. They total $628. I was told by a credit repair company that they could get them removed (for an outrages amount). They told me that they violated my rights by sending them to a third party. Is this true? They made it sound as though I would not have to pay the bill. My second question is if this is false is there away to get them off my credit by making payments on them?
Bills.com
March 20, 2012
It is too bad you did not name names so that we could tell Bills.com readers to avoid the credit repair company you spoke to.

An original creditor has the right to assign the rights for a collection account to a collection agent. The credit repair company's statement that the original creditor violated your rights by assigning your account to a collection agent is not true.

Open a negotiation with the collection agent(s) and insist on a pay for delete.
Rebecca A.
Los Angeles, CA  |  March 18, 2012
Hello, I recently applied for an auto loan and a collections notice for a medical bill came up that from my understanding was paid for by my health insurance 2 1/2 years ago. I am completely certain that this bill should have been paid in full by my insurance and was told it was paid for, however when returning home from college mother gave me a piece of mail indicating it was sent to collections. When I contacted the health insurance this summer to clear up the situation they told me because it was so long ago there was not anything I could do, and because I did not know who I had previously corresponded with, they did not believe me that I had previously addressed this matter with them. Would you advise me to first contact the health insurance to resolve this, the collector to just do a pay to delete, the ambulance company? It has wrecked my credit and I cannot finance a car at this point through a credit union. Thank you so much for your help.
Bills.com
March 19, 2012
Dealing with medical insurance claims is maddening, and you have our sympathy. There really has to be a better way.

Without documentation or some other evidence of the conversation you had with the insurance company or service provider, you have limited options for resolving both of your problems: the debt itself and the damage it caused your credit report. As you mentioned, your best option is a pay for delete. The advantage of a pay for delete is that it solves both problems in one fell swoop.
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