‘Pay for Delete’ Isn’t the Best Tactic for Collections on Credit

“Pay for delete” is a practice in which a debt collector erases a collection account off your credit reports in exchange for a payment on the account.

Credit reports provide the data that goes into your credit scores, so having negative information like a debt collection could harm your ability to get new credit. However, success is not guaranteed, and the latest credit scoring models are beginning to make pay for delete irrelevant.

Here’s how pay for delete works and why it’s likely not worth the hassle.

How ‘pay for delete’ works

Pay for delete starts with a call or a letter to the debt collector in which you propose a deal: You’ll settle the debt, and the collector will wipe the account from your credit reports. Note that you might not need to pay the full amount being requested; debt collectors often buy debt for pennies on the dollar, so a smaller amount might be accepted as long as it covers their costs.

These agreements are rare, though. Credit reporting agencies strongly discourage any attempt to remove accurate information from reports, and creditors are obligated by law to report accurate and complete information if they report to credit bureaus. But a creditor — the collector in this case — can also choose not to report information to the bureaus.

Is ‘pay for delete’ legal?

While the Fair Credit Reporting Act doesn’t offer guidance specifically on pay for delete, the practice isn’t totally aboveboard because the FCRA is in place to ensure accurate reporting of consumer credit history.

If debt collectors choose to report information to credit reporting agencies, they must provide accurate and complete information. Stopping their reporting in exchange for payment is a gray area that undermines the principles behind the credit reporting system.

How long do collection accounts stay on your credit reports?

For now, most collection accounts stay on credit reports for up to seven years from the time the debt originally became delinquent (more than 30 days past due) and was never again brought current. If you pay off an account in collections, it will still appear on your credit reports as a paid collection.

Keep in mind that pay for delete applies only to the collection account. It won’t remove the negative information reported by the original creditor, such as late payments, which also linger for seven years.

Why ‘pay for delete’ is becoming outdated

Pay for delete is motivated by a desire to avoid credit score damage. However, collection accounts that have been paid are ignored by the latest credit scoring models: FICO 9, FICO 10 and FICO 10T, and VantageScore 3.0 and 4.0. While the account is still on your credit reports, it’s doing less damage to your score than if you hadn't paid the account. And FICO 8, an earlier version widely used in credit decisions, ignores even unpaid collections with an original balance under $100.

There’s a catch, however: When you apply for credit, the creditor might not use one of the newer scoring models. If it uses an older model, the collection account could still be affecting your score. The FICO versions used by mortgage lenders, for example, still count all collection accounts.

How to write a ‘pay for delete’ letter

If you decide to attempt a pay for delete agreement, you will need to draft a letter asking the collection agency to remove the debt from your account in exchange for payment.

Before writing the letter, ensure the debt is yours. The Consumer Financial Protection Bureau notes that debt collectors are required under the Fair Debt Collection Practices Act to provide you with validation information, often in the form of a debt validation letter. If you have not received a debt validation letter, do not pay anything until you do.

Here is what to include in a pay for delete letter:

• Your name, address and contact information.

• The collection agency’s name and address.

• Your account number.

• The balance owed.

• Your proposed settlement amount and conditions (for example, say explicitly what you will pay and that in exchange the collector will not report the account to credit bureaus). 

• Deadline for a response.

Alternatives to ‘pay for delete’

Keep a copy of the letter, and ask for written confirmation of the agreed-upon plan.

Due to the legal gray area and regulations outlined in the FCRA, there is a good chance that ‘pay for delete’ will not yield success in modifying your credit report.

However, you have a few options for paying off a debt in collections, including creating a payment plan, paying it off with a lump sum or settling the debt for less than you owe.

You could also simply wait for the account to fall off your credit reports after seven years. But that exposes you to the danger of being sued over the debt, which can lead to wage garnishment.