Is ‘Pay for Delete’ a Useful Tactic or a Waste of Your Time?

Pay for Delete

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

According to Experian, new credit reporting models might pave the way for more forgiving reporting. That change is now being seen in FICO’s latest model, FICO 9:

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.

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1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Finance Lender Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)
  2. Personal Loans: Fixed rates from 5.49% APR to 14.24% APR (with AutoPay). Variable rates from 5.29% APR to 11.44% APR (with AutoPay). SoFi rate ranges are current as of December 1, 2017 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 5.29% APR assumes current 1-month LIBOR rate of 1.34% plus 4.20% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.

2 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate Disclosure: Variable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of August 1, 2017, the one-month LIBOR rate is 1.23%. Variable interest rates range from 6.02% – 15.97% (6.02% – 15.97% APR) and will fluctuate over the term of your loan with changes in the LIBOR rate, and will vary based on applicable terms and presence of a co-applicant. Fixed interest rates range from 5.99% – 16.24% (5.99% – 16.24% APR) based on applicable terms and presence of a co-applicant. Lowest rates shown are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with Citizens Bank at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, Citizens Bank checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Benefit: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.
7.39% - 29.99%$1,000 - $50,000Visit Upstart
5.29% - 14.24%1$5,000 - $100,000Visit SoFi
8.00% - 25.00%$5,000 - $35,000Visit Payoff
5.99% - 16.24%2$5,000 - $50,000Visit Citizens
5.99% - 35.89%$1,000 - $40,000Visit LendingClub
5.25% - 14.24%$2,000 - $50,000Visit Earnest
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