Pay for Delete - One Method for Removing Collections From Credit Report
Last Updated: July 16, 2017
If you are trying to clean up your credit and you have some extra cash, the pay for delete technique is the easiest way to remove collections from your credit report. This is best for collections under $500. Basically, you will agree to pay the the entire amount owed and they agree to remove the collection from your credit report. Even if you are strapped for cash, most people can afford to pay $500 to a collection agency. If it's over $500, I still think this is an excellent technique. For debts over $500, I suggest paying a maximum of 25 percent of the total owed.
To give you some background, most bad debt companies pay or receive literally pennies on the dollar for the debts on which they are trying to collect. The amount that companies pay for bad debt depends on the type of account and its age.
With this in mind, you should always start your offer at 25 percent or less. Let's understand the math here. If your debt is $1,000, let's say at the most, the collection agencies has paid or will collect 7 cents on the dollar, or $70. If you offer them $250 (25 percent), they are still making a profit of $180. Remember, the credit card companies are out of the picture at this point. This money goes directly to the collection agencies.
Why Should You Pay The Debt?
Getting a collection off of your credit report can pay large dividends in an increased credit score. You can save hundreds or thousands of dollars in interest by getting cheaper loans or credit cards. If you can get a collection removed, it's worth the investment to pay.
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How to Use the Pay for Delete Technique
- Find the address of the collection agency on your credit report.
- Send a debt validation letter first, to see what kind of information they might have collected on the account. In many cases a collections firm or junk debt buyer will have no documentation on the account.
- Based on your response you get to your debt validation request:
- If you receive no response via the mail, it's time to give them a call and feel them out. Calling a collections firm can feel very threatening and they may be downright nasty, rude or insulting. The most important information to get from them in this call is the agent's receptivity to an offer to do pay for delete. Even if they sound non-receptive, it's worth proceeding further in this process, though. See if you can verbally work out an agreement on the phone. If you can get one, please don't agree to any payments over the phone until you get that agreement in writing.
- If you receive documentation in the mail from them, ask yourself how much information they may have on you. If they sent you a computer print out, that is not proof of anything. Only let really good documentation (like statements from the original creditor, copies of cancelled checks or a bill of sale from the original creditor) affect the offer letter you are about to write.
- Write the collection agency and offer to pay the amount in full (or at whatever amount you feel you can sell them on) in return for removing the collection account. Points to note in the letter:
- If true, mention the fact that they have not given you any kind of documentation on the debt, validating it is yours or that they are legally entitled to collect the debt.
- Tell them that you prefer just to pay this debt rather than taking them to court for reporting on your credit report when they have insufficient proof to do so.
- Present your offer as a business deal and remind them of the handsome profit they are about to make on this deal by accepting your offer.
- Remember that you are shooting for a complete deletion of the account from your credit report. Having the collection account marked as "paid" or "settled" is not going to help your credit rating.
- Attach a settlement offer.
- The company is under no legal obligation to respond to your offer for pay for delete. Wait at least 30 days to give them a chance to respond.
- If you do not hear back from the collection agency or junk debt buyer, your only option is to call and ask about your offer. Don't stand for any abuse from them, hang up immediately if you feel attacked. Negotiate the agreement you want with the representative. If you don't get what you want, politely ask to speak to a supervisor.
- Under no circumstances make payments until you receive a signed, written acceptance of your offer from the collection agency. The signed document should be from an authorized person who works at the firm, and be on collection agency letterhead.
- Once you have a written, signed agreement, send the collection agency a money order or cashier's check for the amount you agreed to pay them.