Learn more about this collection removal strategy – Forbes Advisor

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Pay to delete is an alternative option to paying overdue debts whereby a collection agent removes a collection account from your credit report in exchange for paying that account. Typically, your debt history will remain on your credit report for seven years, even after you pay it off, but paying for deletion is a process to delete the account sooner.

This may seem like an effective way to improve your credit score, but the strategy is discouraged under the Fair Credit Reporting Act. The practice is also becoming largely irrelevant as more recent credit scoring models do not take into account paid collection accounts.

Before using payment for removal, make sure you understand how the process works, the actual likelihood of improving your credit score, and the alternatives available.

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Pay to delete, what is it?

Pay to delete is when a borrower agrees to pay off their collection account in exchange for the debt collector erasing the account from their credit report. Accounts that are sent to collections generally remain on a consumer’s credit report for seven years from the date of the first default. Newer accounts hurt your score more than older ones, so the negative impact diminishes until the account disappears from the consumer report entirely.

Collection agencies are expected to provide accurate and complete information to the three major credit bureaus—Equifax, Experian and TransUnion. For this reason, paying to remove is not considered totally above board and credit reporting agencies discourage this practice. However, paying to delete is not expressly prohibited by the Fair Credit Reporting Acttherefore some collection agents will offer it as an option.

What is a payment for deletion letter?

A borrower can initiate payment for deletion by calling the collection agency or by submitting a formal request letter, known as a payment for deletion letter. When you submit a payment letter for deletion, clearly state your offer to repay some or all of the debt in exchange for the collection agency to remove the account from your credit file. The collection agency can then decide whether or not to delete the account as requested.

Unfortunately, a letter of payment for deletion has no legal weight. This means collection agencies can take your payment and still refuse to have the account removed from your credit report. For this reason, you should seek written confirmation from the collection agency that they are willing to delete the account before sending payment.

How paying for removal affects your credit

Missing payments can negatively impact your credit score, but an account sent to collections can cause it to drop to around 110 points. The higher your score was at the start, the more points you risk losing.

Keep in mind, however, that the impact of payment for removal on a consumer’s credit varies depending on the borrower’s overall credit profile. For example, borrowers with multiple accounts in collections are less likely to see a significant increase in their score if a single derogatory mark is removed via pay-to-remove. That said, if you only have one collection account and the collection agent agrees to remove it from your credit file, you may see an increase.

Should you use Pay for Delete?

Generally speaking, consumers should not use payment for deletion to address a collection account on their credit reports. Here’s why you shouldn’t rely on payment for removal when trying to improve your credit score:

  • The process is deprecated. Although not prohibited by the Fair Credit Reporting Act, the strategy exists in a gray area. This is because only inaccurate or incomplete entries can be removed from a consumer’s credit report, not accounts that have been paid in full. As such, payment for deletion letters generally carries no legal weight.
  • The debt collector might not follow through. Often, debt collection agencies only care about receiving payment on collections. For this reason, a debt collector may accept your payment and then refuse to remove the account from your credit file.
  • The account will not disappear entirely. Credit bureaus can correct errors and report winnings, but are unlikely to completely delete the entire collection account. This is because a debt collector cannot remove the negative marks reported by the original creditor.
  • Paying to remove may not increase your score. Each credit score model treats collection accounts differently, and some ignore them altogether, including FICO Score 9 and VantageScore 3.0.

Alternatives to payment for deletion

Paying for removal isn’t always a reliable or efficient way to remove collection accounts from your credit report, but there are other options. Before resorting to payment for deletion, consider these alternatives:

1. Dispute any mistakes

Pay to delete exists in a gray area of ​​credit reports, but it’s perfectly acceptable for creditors to delete errors from your credit profile. Fortunately, if you think a collection account is listed on your profile by mistake, there are steps you can take to deal with errors on your credit file.

Disputes can be submitted to each credit bureau online or by phone or mail, in which case the bureau initiates an investigation. When complete, the office indicates whether the disputed item has been deleted, updated, or verified, which means the item is accurate.

2. Ask for a debt verification

Collection agents are required by the Fair Debt Collection Practices Act send borrowers a debt validation notice summarizing account details within five days of the collector’s first contact with the borrower. However, if the collector does not send a validation letter or if you want to review the debt details before repayment, you can submit a debt verification letter asking the agency to provide the account details.

3. Wait for the count to drop from your report

Accounts that are sent to collections fall off your credit report after seven years from the date of the first default. And, while these accounts have a negative impact on your credit score, the effect lessens over time. If you don’t plan on applying for a mortgage or other new credit in the near future, consider leaving the accounts on your report and waiting for them to clear up on their own.

Likewise, some delinquent accounts may not impact your score and may not be worth submitting a payment letter for deletion. For example, accounts in default of less than $100 may not affect your score according to some of the scoring models. Specific types of medical debt may also not impact your score.

Increase your FICO® score instantly with Experian Boost™

Experian can help you increase your FICO® score based on paying bills like your phone, utilities, and popular streaming services. Results may vary. See website for more details.

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