If you have a debt in collections, you may be able to get it removed from your credit report if you can pay it off. Learn about "pay for delete" letters here.
Late payments, missed payments, or any other type of credit delinquency can wreak havoc on your credit. People experiencing credit problems often look for ways to repair their credit, such as writing a pay for delete letter.
A pay for delete letter is a way to negotiate with a collection agency, asking them to remove a negative item from your credit reports in exchange for you paying off the debt. Many people use this strategy when they still owe money on a debt.
In a nutshell, it’s a way to ask a debt collector to remove a credit blemish in exchange for payment.
Many negative marks remain visible on credit reports for seven years (or more, depending on the type of debt). Over this period, people could be denied loans or struggle to gain credit card approval. Even if they do grant approval, creditors and lenders may offer unfavorable terms.
The cost of bad credit can be steep, so try to clean up any lingering credit problems you have.
If you’ve gone more than 30 days without paying a particular bill, the creditor will consider your account delinquent. Around 180 days, at the “seriously delinquent” phase, they’re likely to consider the debt a charge-off and seek out a debt collection agency to recoup their money. By then, your best bet may be to pay the debt and negotiate its deletion.
A pay for delete letter may be a good option when:
You have debts you haven’t paid off and you want to clear up your credit report.
You’re working to settle a debt on your own and want to minimize damage to your credit.
You have enough money to pay off the debt you’ll be negotiating for in the letter.
You owe a debt such as small medical bills, or a cable, phone, or electric bill. (Most banks and credit unions typically aren’t open to these letters.)
Your debt will otherwise stay on your credit report for years. (Older debts are closer to expiration and will fall off your report on their own.)
Know that a pay for delete letter is not a sure option for getting rid of a debt. Not all creditors accept pay for delete letters. Many, especially original creditors, aren’t open to this approach, but paid collection agencies are often more willing to engage.
Consumers often wonder if a pay for delete letter works toward helping clear up their credit history. The short answer is: Sometimes.
While some collection agencies will agree to barter removing negative items for payment, others won’t entertain the idea. Some debt collectors will resist for procedural or ethical reasons, or because they would have to put in extra work with no guarantee of reward.
However, negotiation via pay for delete sometimes can work in particular circumstances:
If the debt collection agency is open to helping you settle a debt and rebuild your credit.
If you have medical debt or utility or phone bill disputes. It's much easier to have this type of debt removed than negative credit information found in credit files relating to mortgages, car loans, etc.
To increase the chances of success, learn all you can about the nature of the debt first, and clearly assess your ability to pay it back. If you can’t pay back the debt in one lump sum, ask in your letter whether you can make a settlement offer to pay in installments.
And be sure to state clearly in your letter that you’re offering to pay back the debt you owe in exchange for the debt deletion from your credit report. Sometimes this is enough to get the process started, although an installment plan may require more conversation with the debt collector.
Once you write and send the letter to the debt collection agency, you will need to wait to hear back from them. Keep in mind that you may or may not receive a response.
If the debt collector does respond, make sure their response contains — in writing, preferably on their company letterhead — an assurance that they’ll agree to your proposed terms: their removal of negative information from your credit report in exchange for your paying off the debt in question.
If they agree in writing to your offer, either to pay the debt amount in full or in part with a payment arrangement, be sure to pay the debt collection agency what you’ve agreed to pay. They may request that you pay with a money order or cashier's check.
Once you’ve paid the debt or begun repayment via an agreed-upon installment plan, the debt collection company should follow up by removing the blemish from your credit report.
Understand that if the collection agency doesn’t accept your offer, they may not tell you so, but instead “respond by not responding.” If you do not receive specific, affirmative responses from them in writing, that may be the only way you’ll know your pay for delete letter did not work.
Debt is one of the primary factors affecting your credit score, about 30% of it. With this in mind, know that efforts toward removing debt collections from your credit report will likely help your credit score and go a long way toward repairing bad credit. In some cases, a successful pay for delete letter can potentially raise your credit score by up to 100 points.
When deciding which debt collection companies to send a letter to, keep in mind that only recent debts negatively impact your credit score. This is important in both FICO® and VantageScore credit scoring models.
In most cases, it would be a waste of time to repay a debt that's seven years old to try having it removed from your credit report, as it already will have approached or exceeded its life span on your credit report. (Keep in mind that you’ll still need to repay the debt; it just won’t show up on your credit report after hitting its reporting time limit.)
To increase the chances your pay for delete letter will succeed, include as much specific information as possible. Here’s a sample pay for delete letter of how you can construct your letter and increase the chances of receiving a signed agreement in return.
Be sure to sign the letter and send it via USPS by certified mail, or at least with a return receipt, so you'll know exactly when it was received.
[Debt collection agency’s name]
[Debt collection agency’s address]
Re: Account Number [insert account number here]
Dear [insert collector’s name] [or Collection Manager],
I am writing in response to the debt validation letter [or information you received from the debt collection agency regarding your debt] that I received from you on [insert date] regarding the debt under the account number listed above.
I am willing to pay off the debt in [the full amount of] [insert amount] [or an amount you could pay monthly under an installment plan]. I offer this payment in exchange for written and signed confirmation that this debt will be cleared completely from the records of all credit reporting agencies and all other references to this account.
If the terms discussed in this document are acceptable, please acknowledge and accept them in a letter written on your company’s letterhead. Once I receive notice of your agreement, I will pay the debt via [insert form of payment].
As granted by the Fair Debt Collection Practices Act, I have the right to dispute this alleged debt. This offer is valid for 14 days from the date of receipt, after which it will be withdrawn, and I will exercise my right to full verification.
Please note that I will revoke my offer if I do not receive your response to this letter within the specified time frame.
I look forward to your response.
[Your address and contact information]
Every consumer should check their free credit reports at least once per year. Under the U.S. Fair Credit Reporting Act (FCRA), you are entitled to receive a free report annually from each of the three primary credit bureaus: Equifax, Experian, and TransUnion.
Any mistakes or old debt listed on any of the credit bureau records or designated as a collection account on your credit report can drag down your credit score and prevent you from being approved for new credit.
In such a situation, a pay for delete letter is a strategy many consumers try to improve the state of their credit reports. Under the right conditions, it may be an effective strategy to settle a debt and improve your credit score.
Some debt collection agencies may be willing to contact the credit reporting agencies to remove a negative mark from a debtor’s credit report in exchange for this method of debt settlement.
This is because a debt collector’s primary job is to buy debt and pursue its collection. For every payment they receive on a collection account, they can buy more debts from original creditors and close out more accounts.
Bottom line: The faster a debt collection agency can settle a debt, the better the return on their investment. Getting a pay for delete agreement can be a win-win scenario for both the debt collection agency and the consumer. If it works, you’ll be on your way to achieving your best credit score possible.
Lauren Bringle is an Accredited Financial Counselor® with Self Financial – a financial technology company with a mission to increase economic inclusion by helping people build credit and savings so they can build their dreams.
Our goal at Self is to provide readers with current and unbiased information on credit, financial health, and related topics. This content is based on research and other related articles from trusted sources. All content at Self is written by experienced contributors in the finance industry and reviewed by an accredited person(s).