Pay for delete: A shady credit-report cleanup practice
Award-winning writer covering consumer and small-business credit cards.
If a collection account is dragging down your credit score, you might wonder if the collector could make it disappear if you reached a payment agreement.
Sometimes referred to as "pay-for-delete," this behind-the-scenes practice can be an option when a debtor offers to pay the delinquent debt in full (or, in some cases, settle it for less than what is owed), if the collection agency will erase the record of the collection from your credit report.
But it's not a common – or necessarily above-board – practice. "Legitimate debt collection agencies will not engage in credit bartering or pay-for-delete schemes," says Cindy Sebrell, vice president of public affairs for ACA International, a trade association for debt collectors.
However, roughly 10 percent or so of collection agencies will agree to a pay-for-delete because they want to collect, says Daniel Sater, a nationally recognized credit expert at CreditScoringAdvisor.com.
You'll likely have better odds of success if you're dealing with a mom-and-pop collection agency, says Jared Strauss, a former debt collector who runs a small debt settlement company. "The smaller the collection agency, the more likely they are to agree," Strauss says of pay-for-delete requests.
When a delinquent debt gets sent to a collection agency, it typically gets reported to credit bureaus as a collection, leaving a negative mark that can stay on your credit report for up to seven years, dragging down your credit score if you fail to pay your debt.
However, thanks to recent changes in scoring models, paying a debt that's in collections could save your score. The new FICO scoring model, FICO 9, which has not yet been widely adopted by lenders, doesn't negatively rank paid collections of any type in your score and gives less weight to unpaid medical collections. So, consumers whose only black marks are unpaid medical collections could see their FICO scores go up by 25 points, according to FICO.
Even if you pay your debt, though, the collection would stay on your credit report, albeit marked as paid. But the collection agency that reported the delinquent account has the power to contact the credit bureaus and have the collection account erased from your credit report. (Here's a sample credit report from Experian that shows a collection from a cable bill.) A collection account shows the name and number of the collection agency, the name of the original creditor, how much you owe and the date of first delinquency.
While the collection agency may have the power to delete the collection account, what it can't delete is any negative information about the account reported by the original creditor, such as late payments.
And debt collectors who agree to remove accurate negative information are violating their contracts with the credit bureaus, says Rod Griffin, director of public education for Experian.
"It undermines the value of credit reporting," he says.
Is pay-for-delete ever allowable?
Over the past several years, the major credit bureaus have cracked down on collection agencies over pay-for-deletes, Sater says. Asking for a pay-for-delete deal used to work a lot better than it does now, he says.
So, is it ever possible to get a collection off your credit reports?
Here are three scenarios where you might have a shot at getting a bill collector to agree to a pay-for-delete:
- You (really) never got the bill. After a trip to the emergency room, one of your doctor bills was sent to the wrong address. Or your final electric bill wasn't forwarded after you moved. Or you were in a coma. In some cases, you can make a convincing argument that a collection should be removed from your credit report after you pay what you owe. "Things happen in life," Griffin says. It's OK to ask that a collection be removed from your credit reports due to an unusual circumstance, Griffin says. But, he adds: "As a method for deleting accurate-but-negative information, that's a different story."
- The collection stems from medical debt. Medical collections are now being treated differently from other types of unpaid debts because they reveal less about credit risk, according to FICO.com. The new FICO scoring model, FICO 9, puts less weight on medical collections and doesn't count paid medical collections at all. The new scoring models aren't yet widely in use by lenders, but from now on collection agencies probably will be more likely to agree to delete medical debts once they are paid, Sater says.
- The original creditor is not a big bank. You probably won't have much luck ridding your credit report of the collection from that credit card bill you never paid. But you might have a decent chance if you originally owed a different type of debt to a smaller creditor, Strauss says. For example, a pay-for-delete request might work with medical, dental, utility, cellphone or pest control bills as well as money owed to a landlord over a broken apartment lease, Strauss says.
If your situation doesn't fit into one of these three scenarios, you can still try, says Tracy Becker, a credit coach and president of North Shore Advisory, a credit restoration and education company. "It doesn't hurt to ask," she says.
Pay-for-delete tips and tricks
If you have a collection on your credit reports and you want to make it disappear, here are five steps you can try:
1. Contact the original creditor. First, contact the creditor to check the status of your debt, Sater says. If the original creditor has sent the debt to a collection agency on contingency, meaning the original creditor still owns the debt but the agency gets to a keep a percentage of funds it collects, ask if the original creditor would be willing to take back the account so you can pay them directly, Sater says. You're more likely to succeed if the debt is a medical, utility or cellphone bill, he says. If the debt is taken out of collections, the collection has to come off your credit report, he says.
2. Call the collection agency. One popular method for trying to get a collection removed is the pay-for-delete letter. You can find sample pay-for-delete letters online, such as this one from CreditYoda.com or this one on the myFICO forums. However it's unethical to deny a debt is yours if you know it is, as these letters do. However, instead of sending a letter, pick up the phone, Strauss says. "Everyone touts the pay-for-delete letter, but it's best to do it verbally," he says. Debt collectors are used to rejection, so a friendly voice on the phone can get their attention, he says. Take a soft approach, telling the debt collector you'd like to pay, then asking if it would be possible to get the collection deleted from your credit reports after you do, Becker says. "If you go in with an attitude, it's not going to get you anywhere," she says.
3. Present your proof. If you're asking that a collection be removed from your credit due to special circumstances, be ready to show the debt collector you're telling the truth, Becker says. For example, if the bill was sent to an old address, offer to provide evidence that you lived at your current address at the time it was mailed, she says.
4. Get it in writing. If the collection agency does agree to delete the collection in exchange for payment, ask for a letter before you pull out your wallet. If the debt collector balks, ask for an email. "These days, collection agencies don't want to put anything in writing because they're afraid they're going to get in trouble," Becker says.
5. No luck? Consider paying anyway. "It's always better to have a paid collection rather than unpaid one," Griffin says. Newer credit scoring models, for both the FICO and the VantageScore, don't count paid collections of any kind. Once you pay a collection account, your credit report should get updated to reflect the paid status, Griffin says.
Even if you aren't able to get a collection removed, time will reduce the harm it does to your score, Sater says. For example, he once worked with a couple that had identical credit profiles, except the husband had 27 collection accounts that were more than 5 years old. His score was only 30 points lower than his wife's, or about one point for each collection, Sater says.
"As the account ages, it becomes less and less damaging," he says.
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