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What Is a Pay-For-Delete Letter?

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In a pay-for-delete letter, a debtor offers to pay a debt collector in exchange for removing a delinquency from their credit report. You’re essentially paying them to “delete” the negative item. However, is pay-for-delete worth it, or should debtors consider another option? Here are a few more details to help you further understand what a pay-for-delete letter is and if it’s the right choice for you.

Know Why Your Debt Has Gone to Collections First

Before anything else, let’s briefly discuss why your debt can go to the collector.

When a borrower fails to make payments on time or defaults on their credit, the lender can hire a collection agency or debt collector to retrieve the debt. A collector may also purchase the debt from the lender at a reduced price and pursue you for the entire amount.

When the lender sells the debt to the collector, you will get a collections account on your credit report. This major delinquency can drastically drop your credit score by over 100 points, depending on how much you owe. In addition, it can make taking out another loan or another line of credit even harder if your score was already low before the drop.

Do Pay-for-Delete Letters Actually Work?

Pay-for-delete letters only work on debts that the lender has validated. This is because it’s illegal for collectors and lenders to try and collect unverified debts. Therefore, before you consider sending the letter, you’ll want to check first whether you owe the lender money and, if so, how much. It’s part of your rights as a debtor in Texas to be protected from collectors who, for instance, falsify the amount of debt you have.

Will My Credit Score Go Up?

credit scoreIt mainly depends on your credit profile as a whole. For example, if you already have multiple delinquencies in your report, removing only one negative item will unlikely improve it significantly. However, if the collections account is your only delinquency, removing it can make a bigger difference.

You should also check if the creditor uses the latest credit scoring algorithms, which no longer include paid collection accounts when scoring you. This would eliminate the need to send the pay-for-delete letter if you’ve already fully repaid your debt.

Even if the collector goes through with the pay-for-delete, it doesn’t guarantee that all negative remarks about the debt will be erased from the report. Collectors can’t do anything with marks made by the lender.

Are Pay-for-Delete Letters Legal?

While sending a pay-for-delete letter to the collection agency is technically legal, they aren’t obligated to accept the offer.

As a matter of fact, removing truthful information from the credit report is unlawful, as per the Fair Credit Reporting Act. A collector is subject to the rules of the credit bureaus and risks violating the law if they agree to remove a valid collections account and provide inaccurate credit information.

What Are Some Tips When Offering Pay-for-Delete?

If you decide to push through with a pay-to-delete letter, here are a few pointers that can help you negotiate more effectively:

  • Avoid verbal agreements. You’ll want the collector to confirm, in written form, that they agree to your terms and will remove the account from the report. This makes it easier to dispute with them if they don’t follow through with their part of the deal.
  • Don’t offer to pay before they delete the collections account. The collector may not follow through with the deletion while still taking your payment.
  • Don’t immediately admit in the letter that you owe them money. Instead, ask them to verify the debt first. If they have no proof, you aren’t obligated to pay.

If the collector agrees with the pay-for-delete offer and claims to have removed the account, be sure to check your credit report at least a month later to confirm it. More importantly, you should also have enough money on hand to pay the collector shortly after the account’s removal.

Are There Alternatives to Making a Pay-for-Delete Letter?

You don’t always have to resort to a pay-for-delete letter to remove the collections account or improve your credit score. Let’s look at some other ways to deal with this issue.

Just Pay the Debt

We mentioned earlier that a pay-for-delete with the collector wouldn’t remove the creditor’s negative item regarding your debt. This means the collections account will still reflect on your report in one form or another.

Furthermore, since new credit scoring models only include unpaid collections accounts, it’s best to focus on repaying the debt if your only goal is to raise your credit score.

Dispute the Collections Account

Suppose you suspect the collections account in your report was a mistake. In that case, you can bring the matter and supporting documents to the credit bureaus instead of immediately making a pay-for-delete letter to the collector. The credit bureaus will investigate the disputed account to determine if it is erroneous or valid.

Wait for the Account to Disappear from the Report

Like all credit delinquencies, your collections account will only be part of the credit report for up to seven years. Afterward, it should fall off the report and have no bearing on your score anymore.

Do note that Texas’ statute of limitations for debt collection differs from the period when the collections account reflects on your credit report. The delinquency can remain even long after the creditor can no longer take legal action to get back their money.

In any case, if the collections account only has a short time left before they’re gone, it’s less troublesome on your part to just wait it out instead.

Improve Your Borrowing Habits

Adopting healthier spending and borrowing habits until you can be debt-free will benefit your credit profile, in the long run, more than a pay-to-delete that is unlikely to erase your negative record. If you have to take out a loan again, try your best to borrow only what you can afford to pay back. It’s easier to budget for smaller debts, reducing the risk of defaulting and dealing with the debt collector.

Need to Pay Off Your Debts Fast?

Dealing with debt collectors is more trouble than it’s worth, so don’t let your debts stay unpaid for too long. If you need to pay off your debt on short notice, you can approach Power Finance Texas for help. We can approve your personal loan request even if you have a bad credit history. All you need to do is comply with our simple requirements, and you’re good to go.

Check out our website for more information on our fast cash loans.