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Having debt—especially debt in collections—can be a heavy burden to carry. In addition to adding stress and financial uncertainty, unpaid debt can lead to credit score drops. Late payments, charge-offs and collection accounts are a few of the ways that debt can negatively affect your credit score.
One way to try to repair the damage to your credit score is to use a pay for delete letter, which is a negotiation tactic between you and a collection agency. Essentially, a pay for delete letter asks a collection agency to remove negative information from your credit report in exchange for full payment of your debt.
Pay for delete agreements are one approach to dealing with debt, so read on to learn how they work, whether they might be the right approach for you and other ways you can manage debt.
What is pay for delete?
Pay for delete is one way to deal with debt: you send a letter to a creditor offering to pay your debt in full in exchange for having negative information removed from your credit report. Sometimes a creditor will only agree if you pay more than what you originally owed on the debt, and other times they won’t accept the offer at all.
Most pay for delete letters include the following information:
- Your name and address
- The date
- The account number for the debt
- A note that while you do not acknowledge the debt, you are willing to settle
- The exact terms for the agreement, like how much you’ll pay and what you’re asking the creditor to do in exchange for the payment
- A request for a signature to formally accept the agreement
Before sending a pay for delete letter, you may want to consult a lawyer or financial advisor to ensure your letter is well written and clearly identifies your request. Also, know that pay for delete letters are only useful in cases where you legitimately owe a debt. If you believe that the debt doesn’t actually belong to you, you could try disputing the debt instead.
Do pay for delete letters really work to improve your credit score?
A pay for delete letter could potentially improve your credit score by removing negative information from your credit report. However, the effect on your score will depend on your particular situation. Also, even if you pay off the debt, creditors may not actually remove negative information from your credit report.
Here’s what you need to know about pay for delete and your credit score:
Pay for delete won’t remove all your negative items
After you send a pay for delete letter, you may end up convincing a creditor to remove your collection account from your credit report. While that could help your score, any other negative items related to your debt—like late payments, charge-offs or repossessions—
likely won’t be removed by pay for delete. In fact, the original creditor may continue to report the collection account even if the collection agency deletes it.
If you have many negative items on your credit report, removing a single collection account is unlikely to lead to a big score increase. Older collection accounts also tend to have less effect on your score than more recent accounts, so using pay for delete may not be a useful strategy. In general, information about debts leaves your credit report after seven years, so an older account will eventually stop affecting your score.
Pay for delete isn’t legally binding
Even though a pay for delete arrangement involves terms and a signature, it usually doesn’t carry any legal weight. Creditors are bound by the rules in the Fair Credit Reporting Act, which requires that they provide the credit bureaus with accurate information about debts. As a result, many creditors are hesitant to delete accurate information about debt, which could eventually lead to legal trouble for them.
If you do get a pay for delete arrangement settled with a creditor, they may not actually follow through after you make your payment—and you probably won’t have any legal recourse. Creditors may even temporarily delete your debt and later report it again. If the debt was legitimately yours, you probably won’t be able to dispute the information, since accurate information can remain on your report for up to seven years.
New credit scoring models make pay for delete less valuable
Lenders and creditors typically use either FICO® or VantageScore® to make decisions about new loans and credit. Newer versions of these scoring models handle collection accounts differently, which could mean that pay for delete letters are less useful or even unnecessary.
Oftentimes, new scoring models completely ignore paid collection accounts, which means that you can achieve the same effect as a pay for delete letter simply by paying off your collection accounts. Also, the new approach to scoring sometimes de-emphasizes small collection accounts, so if your balance is low, the account may not be influencing your score at all.
Keep in mind that not all lenders use the updated scoring models to make credit decisions, so your collection accounts could still be affecting you for now. As time passes, however, more creditors are likely to adopt the newer approach, making pay for delete less important.
3 alternative ways to deal with debt
Pay for delete may be a good approach for you if you have a single collection account that is bringing down your score, but there are often better options for most people dealing with debt.
Consider three viable alternatives to pay for delete letters.
- Request verification for the debt. When dealing with collection agencies, a great first step is asking for verification that the debt is legitimately yours and the collection agency is authorized to accept payment. This will help you avoid fraudulent debts as well as debt collection scams.
- Wait for older accounts to leave your report. Since information about debt leaves your report after seven years, it’s often reasonable to just wait for older accounts to leave your report. Note, though, that you may still be responsible for paying a debt even if it’s no longer affecting your credit score.
- File a dispute with the credit bureaus. If you believe that a debt is illegitimate, you can file a dispute with the credit bureaus—TransUnion®, Experian® and Equifax®—by sending a letter with evidence proving the debt is not yours. If your dispute is successful, information about the debt will be removed from your account, typically leading to a score increase.
While it is possible to file disputes and manage debt on your own, it’s often helpful to work with a credit repair company. These companies have experience reviewing credit reports, making plans to deal with debt and working with the credit bureaus to remove inaccurate information.
With time and patience, it’s possible to regain control of your credit report and start making strides toward a higher credit score, opening up the doors to better auto loans and mortgages.
Reviewed by Leikeisha Finai-Jones, Credit Consultant at CreditRepair.com.
Leikeisha Finai-Jones joined CreditRepair.com back in 2020 as a social community coordinator. Leikeisha knows how the credit industry works and how what pitfalls consumers need to look out for—Leikeisha mastered the skill of problem-solving even in tough situations involving identity theft, credit repair and other issues. Leikeisha has seen it all, and knows how consumers can make the most of their rights to boost and protect their credit.
Note: The information provided on CreditRepair.com does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only.
