What is pay for delete and how does it work? (2024)

Negative items on your credit report, such as accounts in collection, damage your credit score. A pay for delete is one potential option that might help you remove that account from your credit reports and send your credit score moving back in the right direction, if you can convince the collection agency to agree.

However, credit reporting agencies discourage the pay for delete practice as they require debt collectors who report accounts to the credit bureaus to provide truthful and accurate information. Removing a legitimate collections account runs afoul of that agreement. That’s why it can be difficult to get a collection agency to agree to a pay for delete request. Furthermore, this debt settlement strategy isn’t as worthwhile as it was in the past, depending on the type of collection account that appears on your credit report.

What is ‘pay for delete?’

A “pay for delete” or “payment for deletion” refers to the process of contacting a collection agency and getting it to agree to remove a collection account from your credit report in exchange for payment.

In general, a collection account can remain on your credit report for up to seven years (and in rare cases, longer). The goal of a pay for delete arrangement is to get a collection agency to remove a collection account entirely from your credit report before the Fair Credit Reporting Act (FCRA) requires it to do so.

How does ‘pay for delete’ work?

Negotiating a pay for delete settlement agreement begins with a call or a letter to a collection agency. In your call or letter, you offer to settle a debt (or pay a debt in full) if the debt collector will agree to ask the credit bureau(s) to remove the negative item from your credit report(s).

If the debt collector agrees to your request, it’s important to get the offer in writing. Having a written offer can help protect you in case the collection agency fails to delete the account after you pay.

However, the Fair Debt Collection Practices Act (FDCPA) prevents debt collectors from making false or misleading claims, so you may not be able to get the debt collection agency to comply with your request or have little recourse if the agreement isn’t upheld.

Why ‘pay for delete’ may not be the best idea

Trying to negotiate a pay for delete arrangement can be frustrating. While collection agencies aren’t required to report negative accounts to the credit bureaus because credit reporting is voluntary, many collection agencies do share information with Equifax, TransUnion, and Experian.

When a collection agency applies to be a data furnisher with a credit reporting agency, it signs a subscriber agreement detailing what the debt collector is and isn’t allowed to do. In that agreement, a credit bureau would prohibit a collection agency from requesting the deletion of accurate but negative accounts after receiving payment from consumers. This is a common restriction in debt collection agreements.

If a collection agency violates its agreement with a credit bureau and gets caught, it might lose its ability to report future collection accounts to that credit bureau. And the inability to report activity to the credit bureaus could put a collection agency out of business. Therefore, it’s easy to understand why some collection agencies might be opposed to pay for delete agreements.

‘Pay for delete’ and your credit

For most people, the primary motivation for trying to use a pay for delete strategy is the desire to improve their credit score. Good credit, after all, can open the door to better financing options like credit cards, personal loans, mortgages, and more.

In general, paying off a collection account doesn’t remove it from your credit report. Per the FCRA, a paid collection account can remain on your credit report for up to seven years (and in rare cases, longer). Recent changes to the latest credit scoring models ignore paid collection accounts, but most lenders continue to use the older credit scoring models.

A pay for delete arrangement seeks to remove a collection account entirely from your credit reports. When a credit bureau removes a negative item from your credit report (at the request of a collection agency or otherwise), there’s a chance your credit score could improve. However, the impact of a deletion will depend on the overall makeup of your credit report, as any late payments on the account reported by the original creditor will most likely remain on your credit reports. Late payments stay on your credit reports for seven years but have less of a negative impact as time passes.

Should you use ‘pay for delete?’

Active collection accounts damage your credit score. A low credit score can make it more difficult to qualify for financing and might cause you to pay higher interest rates when lenders do approve you for loans and credit cards.

Depending on the type of collection account you owe, attempting to negotiate a pay for delete settlement might not be necessary. Paid off medical debts, for example, are no longer included in credit reports. As of July 2022, the credit bureaus changed their policies to automatically remove paid medical collections from consumer credit reports on their own (even though the FCRA doesn’t require this removal).

If you have non-medical collection accounts, attempting a pay for delete negotiation might be worthwhile, depending on the situation, because paying a non-medical collection won’t remove it from your credit report if less than seven years have passed from the date of the first missed payment on the original account that led to the collection.

Some credit scores, like FICO® Score 9 and FICO® Score 10, ignore paid collections. Yet many lenders (especially in the mortgage industry) still use older versions of the FICO® Score that may count collection accounts with a zero balance against you.

So, there’s still a chance that paid collections could hurt you when you apply for a loan, credit card, or other types of financing. For that reason, attempting to negotiate a pay for delete could be worth a try, especially if you hope to buy a home in the near future.

Better alternatives

Whether you decide to try to negotiate a pay for delete settlement or not, it’s wise to focus on building good credit in other ways. The following tips might help.

1. Check your credit reports. It’s wise to review all three of your credit reports from Equifax, TransUnion, and Experian on a regular basis. You can claim free reports from each consumer credit reporting agency once every 12 months via AnnualCreditReport.com. If you discover mistakes on any of your credit reports, you can (and should) dispute them with the appropriate credit bureau. This Federal Trade Commission guide provides tips on how to manage the dispute process.
2. Establish credit as needed. Building a positive credit history is another smart strategy to consider as you work to establish a good credit score. Credit cards can be useful credit-building tools when you manage them in a responsible way (e.g., on-time payments and repaying your full balance each month). Consider credit cards for people who are new to credit if you’re just starting out or becoming an authorized user or a friend or family member’s well-managed credit card account.
3. Pay down debt. Reducing your credit card debt might also help you improve your credit while saving you money in interest charges. When you pay down credit card balances, you lower your credit card utilization rate, which measures the amount of debt you’re carrying in relation to your available credit. Credit utilization is a major factor that influences your credit score. The lower your utilization rate, the higher your credit score has the potential to climb.
4. Pay on time every time. On-time payments are the most important credit scoring factor. Payment history accounts for 35% of your credit score after credit utilization (which accounts for 30% of your score). That’s why it’s critical to make at least the minimum payment due every month.

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