Some collection companies are willing to delete negative information if the consumer is willing to pay the debt. However, in recent years the credit reporting bureaus have frowned upon this practice.
A Pay For Delete Letter is used to negotiate past due or charged-off debts with a creditor or collection company. The letter opens the door for you to request that a bad debt be deleted from your credit file in exchange for you to pay off a portion or all of the debt. Many times you can negotiate the debt lower and get it deleted depending on the age of the debt. It is not guaranteed to work but it can be an effective credit repair tactic.
Often you can hire a reputable credit repair company to help you with a Pay For Delete Letter or you can try to do it on your own. In this article, we will provide you with a template that can guide you in your communications with the creditor.
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How Does a Pay For Delete Letter Work?
Pay for Delete Letters are just like they sound. You are paying the debt to have it deleted and remove a negative item from your credit report. You have an old collection that is on your credit report. It could be stopping you from purchasing a home or obtaining other credit. You reach out to the creditor and let them know you are willing to pay some or all of the debt if they are willing to remove the debt from your credit report.
Pay for Delete is considered a shady practice by the credit reporting bureaus and in recent years they have cracked down on collection companies who do this. It is preventing your story from being told on the credit report. It also means that you may still owe the balance debt.
Pay For Delete does not necessarily mean that the debt is considered to be paid in full unless you get that specified and in writing.
Do Pay For Delete Letters Even Work?
Yes, they do work on occasion. Many collection companies are only interested in getting a return on their investment. There are many collection companies that specialize in buying people’s bad debt.
Let’s say you owe $1000 to a doctor’s office. The doctor has no interest in trying to collect this debt so they hire a debt recovery company to collect it. Usually, the debt collection company will try to collect the debt for a predetermined amount of time, usually, 90-180 days, for a portion of the debt that they collect or a monthly fee.
After that predetermined amount of time has passed, the debt has less value. It is typically sold to another collection agency for pennies on the dollar. On a $1000 debt, a collection company could pay as little as $40.00.
The third-party collection company will then start to try and collect the debt that they just purchased. This is why you hear from companies trying to collect from you a year or two from the time you incurred the debt. If it does not look promising for the collection company to actually get any money, they are willing to take less than the original debt.
Is a Pay For Delete Letter Worth It?
Yes and no. The debt will remain on your credit report for seven years. As long as it is on there then it could affect your ability to obtain credit. In case you are just trying to raise your credit score and the debt is over three years old, it is having less of an effect on your credit report than it did when it was first reported.
However, if the collection is preventing you from making a purchase according to the lender guidelines, then it may be worth it to have it removed.
If you are applying for credit, most lenders just want to show the debt as being paid. So having it removed may be unnecessary.
But since you are paying it off anyway, and collection companies are willing to delete it, then you might as well have it deleted. That is if the collection company is willing to delete it. There are no guarantees.
How Long Does It Take For The Debt To Be Removed?
Most collection companies will have the debt removed within a couple of weeks but I have had customers who requested that it be removed within 24 hours.
Credit reporting runs on a 30-day loop and the creditor decides their own reporting schedule. I would plan on waiting 30-45 days to see your collection removed from your credit report. You can always explain your situation and ask if it can be deleted sooner.
What Will a Pay For Delete Letter Do To My Credit Score?
Now this is where it can get tricky and why you should careful when doing a Pay For Delete Letter. Your credit score may go down!
Sometimes that collection might be feeding something good into your score that you are not aware of. You may have been making payments on time at some point. That good payment history will be completely deleted and having it removed could lower your score.
The bottom line is no one can tell you what will happen to your credit score. But you need to be aware that it can hurt your score when you have a collection deleted.
How Do I Negotiate My Debt?
Some collection companies will require you to pay 100% of the debt if they are willing to remove it completely.
Having knowledge is power in any negotiation. Just knowing the collection company only paid $40.00 on every $1000 of debt that you owe can empower you to step up and negotiate a better outcome for yourself. But you must be prepared to pay all of the debt if you want it deleted.
Remember, it is a business. They lose money on many accounts that are never paid. Also, if they purchased the debt when it was newer they may have paid more than $40.00. Negotiations have to benefit both parties.
Typically, a debt collection company will accept less money as the debt ages. So if you have a debt that is 6 years old, the debt collector knows in a year, they will get nothing and they have to remove the debt from your credit report.
Conversely, if the debt is only a year old, they know they have 6 years left that they can report this on your credit and try to force you to pay.
The most I have ever seen negotiated off was 60%. The debt was more than 4 years old and my customer wanted to purchase a home. The debt collector knew the customer would just wait it out if they had to pay more than $400.00.
Typically, in my experience, the most you can get is a 50% reduction. On newer debts, expect to pay more. The person on the other end has specific guidelines that the collection company has given them on what they can accept so there is not much more that you can do.
How Much Will My Credit Score Go Up After A Collection Is Removed?
Your credit score may not go up at all depending on the age and circumstance around the account. However, if it caused a 90 point drop on your credit report and you are rectifying it fairly quickly, in theory, once it is removed you may see a 90 point increase.
There are no guarantees your score will go up if you have an account deleted.
Can I Pay The Original Creditor Instead of the Collection Agency?
That will depend on if the collection agency actually owns the debt or if they were just hired to collect the debt. I always recommend that you try to pay the original creditor if they still own the debt.
If the original creditor no longer owns the debt then you will not be able to pay them. You will have to deal with the debt collector who has purchased the debt. The good news is that they paid very little for this debt so this means that you will most likely get to pay less than you originally owed.
What If The Collection Agency Will Not Delete?
Many larger collection companies will not participate in the Pay For Delete process. They feel that it is compromising the credit reporting system. The smaller collection agencies may be willing to agree,
Even if they do not agree to delete, most collection companies will negotiate on the amount owed. So you still have an opportunity to do the right thing and pay some of your debt if it is yours.
If the collection company is not willing to delete the account but they are willing to negotiate, you can try a different tactic.
Once a collection is paid, most collection companies will not take the time to verify a debt. You can dispute the debt and if they do not respond will be removed.
Do I Actually Need To Write? Can I Just Call?
Yes! Frankly, when I had customers who tried this, they just picked up the phone and called the creditor. You can just ask if they are willing to delete for payment. There may be no need to write a letter. But we provide one so you can see what to say when you call.
The collection company typically has a standard form letter that they use when agreeing to this practice. The most important thing is to find out if they are even willing to do Pay For Delete.
We will provide you a letter to use. The letter below will let you know what you should expect and what to ask for from the collection agency. Frankly, typing out the letter is not always necessary.
Pay For Delete Letter Sample
*If you choose to use this letter you do so at your own risk.
Date:
RE: Account #
Creditor/Collection Name and Address
Dear XYZ Collections,
I am writing to you concerning the debt that you have contacted me about. I am writing in hopes that we can settle the matter in a way that will benefit both parties. This letter is in no way an acknowledgment of this debt as I have not received any information to verify the debt is mine or that the debt is accurate.
However, you are reporting this debt on my credit report. In an effort to have it removed, I am willing to pay this debt in full (50%, 75%, etc), if you are willing to completely delete and remove it from my credit report.
If you agree to remove the debt in exchange for (50%) of the balance, I will send certified funds to you within 24 hours of receiving written confirmation.
- By accepting this offer you agree not to discuss this offer with any third parties.
- You will completely remove this debt from my credit report.
- You will not show the debt as settled on my credit report
- Your company agrees that the debt is paid in full.
- You agree that you will not sell or transfer the debt, or attempt to collect on this debt through another party.
If you accept this agreement please send a letter reflecting the terms to:
Name
Address
The letter will be treated as a contract and should be signed by an authorized representative of XYZ Collections and written on your company letterhead. Furthermore, the contract will fall under the laws of my state.
If we can not come to an agreement within 15 days of receiving this letter, I will continue to exercise my rights under the Fair Debt Collection Practices Act, where I have the right to verify and dispute the debt.
Final Thoughts
Remember, in your negotiations to start low. You can always come up if your offer is too low but you can not go down. You can also look into a Goodwill Letter to help with removing negative items from your credit.
If you are still uncomfortable in the process hiring a reputable credit repair company may be a better option for you to start with.
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