Wouldn’t it be great if you could wave your debt away with a magic wand? Back when I was in my early 20s and dealing with credit card and student loan debt, I became obsessed with what it would feel like to have my debt be here today, gone tomorrow.
Would I make different choices in life? Maybe feel healthier? Possibly even look different? At the very least, I’d have a better credit score.
What if it was really possible to magically get rid of negative influences on your credit score? With certain tactics, such as “pay for delete,” it almost seems as though it is. Before you get too excited, let’s talk about what pay for delete really is – and if it works.
What is pay for delete?
Pay for delete is the act of negotiating with the original creditor or a collection agency to have past-due debt – a major drag on your credit score – removed from your credit report in exchange for paying it off.
Say a debt collector is calling you about a delinquent debt. You would offer to pay the debt if they agree to remove the account from your credit report.
Why would some people want to do this? Collections accounts don’t drop off your credit report after they’re paid, even though the status will change to show that they’ve been paid. In fact, collections accounts remain on your credit report for about seven years (starting from the day your account became delinquent).
Therefore, anyone worried about their credit score might be tempted to send a pay for delete letter. However, this doesn’t mean collectors will comply. In fact, more often than not, your pay for delete request could be denied.
Magic wand or just wishful thinking?
It’s true that collectors reporting to the credit reporting agencies (CRAs) are able to amend their reports. However, a collection agency that amends its reports too often can appear unreliable.
To the CRAs, a collection agency’s unreliability violates the Fair Credit Reporting Act’s (FCRA) requirement of “accuracy and fairness in credit reporting.” This could result in a CRA terminating its relationship with the collection agency.
This is why many collectors aren’t likely to agree to uphold a pay for delete request. It simply wouldn’t be truthful credit reporting, and it would put their relationship with the CRAs at risk.
Pay for delete letter template
Keep in mind that pay for delete isn’t a strategy that’s likely to work, but there’s probably no harm in trying. After all, the worse that can happen is you get a “no.” If you want to give it a shot, you can follow a pay for delete letter template.
The main elements of a pay for delete letter template should include:
- An outline of your willingness to pay the debt in full or for a settled amount.
- A caveat that you are not recognizing or taking responsibility for the debt.
- A request that the debt is removed from your credit report within a certain time frame after payment.
- A request for a letter from the collector agreeing to the terms before you send the payment.
- A caveat that if you do not hear from the collector within a certain time frame after sending this letter, you will withdraw the offer.
In order to make sure your letter has been received, you can send your pay for delete letter via certified mail with a request for a return receipt.
It’s important to note that sending a pay for delete letter isn’t the same as disputing a debt. If you’re being contacted by a collection agency about a debt that you don’t actually owe, the Consumer Finance Bureau has a debt dispute letter template you can use.
The good news
The good news is that the newest credit scoring models are changing the way paid collections are factored into scores. For instance, with some new scoring models, collection accounts will be excluded from the calculation once they are paid, even though they are still on the credit report.
If your biggest focus is on rebuilding your credit score now, there are ways to do it other than pay for delete. For example, paying all of your bills on time and decreasing revolving debt (such as credit cards) can go a long way.
It might not be as nice as the thought of erasing all your debt with a magic wand. But the more organic credit building methods are just as empowering because they put you in the driver’s seat.
Pay on time and work to reduce your debt, and you will see positive improvements in your score.
Interested in a personal loan?Here are the top personal loan lenders of 2018!
|Lender||APR Range||Loan Amount|
|1 Includes AutoPay discount. Important Disclosures for SoFi.
2 Includes AutoPay discount. Important Disclosures for Payoff.
3 Important Disclosures for FreedomPlus.
4 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
5 Important Disclosures for LendingPoint.
6 Important Disclosures for LendingClub.
All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.16% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at time of application. The origination fee ranges from 1% to 6% and the average origination fee is 5.49% as of Q1 2017. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.
7 Important Disclosures for Earnest.
8 Important Disclosures for Avant.
* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.
** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33
* Important Disclosures for Upgrade Bank.
Upgrade Bank Disclosures
** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.
|7.73% – 29.99%||$1,000 - $50,000||Visit Upstart|
|6.26% – 14.87%1||$5,000 - $100,000||Visit SoFi|
|6.99% – 35.97%*||$1,000 - $50,000||Visit Upgrade|
|8.00% – 25.00%2||$5,000 - $35,000||Visit Payoff|
|4.99% – 29.99%3||$10,000 - $35,000||Visit FreedomPlus|
|5.99% – 18.99%4||$5,000 - $50,000||Visit Citizens|
|15.49% – 34.49%5||$2,000 - $25,000||Visit LendingPoint|
|6.16% – 35.89%6||$1,000 - $40,000||Visit LendingClub|
|6.99% – 18.24%7||$5,000 - $75,000||Visit Earnest|
|9.95% – 35.99%8||$2,000 - $35,000||Visit Avant|