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Are Pay for Delete Letters Effective?

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In a Nutshell

If you have had a debt sent to collections, it may be possible to get the negative item removed with a pay for delete letter. This type of letter politely asks a collection agency, debt buyer, or other creditor to remove the negative item from your credit report in exchange for paying off the debt in question. There are potential drawbacks and benefits to this approach. Read on to learn more about pay for delete letters and how they can affect your credit history and credit score.

Written by Mark P. Cussen, CFP® , CMFC.  
Updated August 23, 2021


If you have had a debt sent to collections, it may be possible to get the negative item removed with a pay for delete letter. This type of letter politely asks a collection agency, debt buyer, or other creditor to remove the negative item from your credit report in exchange for paying off the debt in question. There are potential drawbacks and benefits to this approach. Read on to learn more about pay for delete letters and how they can affect your credit history and credit score. 

What Is a Pay for Delete Letter?

In a nutshell, a pay for delete letter is a request that you send to your original creditor, debt collection agency, or any other entity that currently “owns” a debt that is now in collections. In this letter, you’ll ask them to remove negative information on your credit report in return for fully or partially paying off your debt. The creditor or collection agency is not legally required to accept your offer, but in some cases the lenders will because they are eager to receive the money you owe. 

Note that a pay for delete letter is not to be used to correct errors on your credit report. To correct inaccurate credit history entries, you’ll need to file disputes with the major credit bureaus. Instead, pay for delete letters ask creditors to retract their reporting that you missed payments and/or defaulted on your debt in exchange for paying the debt down or paying the debt in full. 

When Can a Pay for Delete Letter Be Used for Credit Repair?

This tactic can be used with any type of debt that has gone to collections, including credit card debts, medical debt, utility payments, student loans, or any other type of consumer debt. You should only use a pay for delete letter on debt that your creditor has already verified. If the creditor hasn’t validated your debt, they cannot legally continue to try to collect on that debt or report it on your credit report. Be sure to send a debt verification letter to any creditor that is trying to collect a debt from you that has not been verified.

A delete letter is an especially useful tool to settle debts that aren’t very old. After seven years, most of your debts can no longer be legally reported on your credit file. This is a right extended under the Fair Credit Reporting Act (FCRA). Until then, all of your outstanding debts can be reported to the major credit reporting agencies (Experian, Transunion, and Equifax). If you become delinquent on any of your accounts, your credit score may suffer. 

Also, delete letters are usually much more effective with smaller debts, such as overdue utility bills, cell phone bills, minor credit card balances, lesser medical bills, etc. Pay for delete letters aren’t likely to work with debts with large balances or with “large creditors” like banks. If you’re struggling to pay large debts, you may benefit from scheduling a free credit counseling consultation with an accredited, nonprofit credit counseling agency. This credit counseling opportunity will help you construct a comprehensive - and wholly personalized - plan to manage your debt moving forward. 

If you are considering using a pay for delete letter, be sure to send it via certified mail before you contact your creditor via alternative means (phone, online, etc.), so that you’ll have proof that they received it. Do not agree to pay off or settle the debt prior to sending the letter. Be careful when speaking with your creditor about the debt and avoid making promises to pay prior to sending the letter because you may lose bargaining power. You should also be prepared to pay quickly if your creditor or debt collection agency accepts your offer. Make sure you have access to the funds to cover the agreed-upon settlement amount or your offer could be rejected. 

Pay for delete letters are a legal negotiation tool. However, although they are legal to send, no creditor or collection agency is obligated to accept this kind of offer.  

Most debt collectors are under contract with the major credit bureaus. These contracts often prohibit them from removing accurate information from their customers’ credit files. Any delinquent accounts, late payments, and charge-offs that are accurate should appear on your credit report for the typical seven years. Creditors frown on removing legitimate negative information from your credit history when it is accurate because their industry is built on data accuracy and trust. Removing accurate information undermines that aim. If a creditor or debt collection agency makes a pay for delete agreement, they may be in violation of their agreements with the bureaus. 

Can a Pay for Delete Letter Really Repair a Credit Report?

Yes, it can work, but be warned that the overall success rate of such letters is generally low. Additionally, the latest credit scoring models (FICO 9, VantageScore 3.0) ignore collection accounts that have been paid, making a pay for delete letter unnecessary if you pay off your debt. Unfortunately, most creditors are still using older FICO scoring models. This means that a pay for delete letter may still be worth your while. Having a major blemish deleted from your credit history can help substantially increase your score in some cases. If you submit a delete letter and it is accepted, be sure to pull a free credit report to make sure that the negative item has indeed been removed. 

What Should a Pay for Delete Letter Include?

Your delete letter should include your personal information and details about the debt, including your full name and address, the creditor’s or debt collector’s name and address, your account number, and the amount of the debt.

You should also include some terms for the agreement. Give the collector a limited amount of time to accept. Tell the collector if they accept your letter, they must send you a signed agreement on company letterhead with the signature of a company representative. Let them know that your payment is contingent on receiving this letter. Then and only then will you send the settled-upon payment amount (via cashier’s check, money order, or bank wire) to the creditor.

Be sure that you do not in any way acknowledge that the debt is yours or that you owe any part of it. If the debt has not been previously verified, you could also request verification at this time. If they cannot provide verification info, you can dispute the debt to have it removed from your credit files without paying it. There are several templates available online that you can use and modify accordingly. Also, be sure to get a return receipt for your letter so that you have proof that your creditor received it. 

Pros and Cons of This Approach

If you’re considering sending a pay for delete letter, you may be wondering what the benefits and drawbacks are. On the upside: There is nothing illegal about it. You are perfectly within the bounds of the law when you send this type of letter to a creditor. Also, it is relatively easy to craft the letter and send it, and it doesn’t take much time to do it. The biggest advantage is that if the collection agency accepts your agreement, you can potentially settle the debt for less than you owe and having the negative information removed from your credit report can help you to get better terms or lower rates in the future when you apply for new credit. If your letter is not accepted, there’s no harm done. It can’t hurt to ask.

With that said, debt collectors/creditors do not have to accept your offer or even respond to it. Waiting for a response may “eat up” valuable time you could be spending doing other things to boost your credit. These offers are rarely accepted for larger debts and creditors, such as banks and/or credit unions. And even if the debt collector accepts your offer and removes the collection entry from your file, the late-payment record reported by the original creditor will remain on your credit report.

Perhaps the biggest drawback is that even if your offer is accepted, you have a signed agreement in hand, and you pay the debt, the collector may fail to honor the agreement. If your creditor does not remove the negative mark from your credit history as agreed, there isn’t very much you can do about it. You can appeal to the Consumer Financial Protection Bureau (CFPB) or the Federal Trade Commission (FTC), but the law is on the creditor’s side in these cases. Your best chance is to show the FTC or CFPB the letter your creditor sent you saying that they accepted your offer. The regulatory agencies might be able to help you seek some relief at that point. 

Let’s Summarize...

A pay for delete letter is a legitimate tool to use for negotiating with debt collectors. While many debt collection agencies will not accept this type of letter, some will, and you have nothing to lose by sending one to your creditor. But, debt collectors are not obligated to accept or even acknowledge the offer in the letter. Some creditors are more likely than others to accept these offers. While it’s possible to get a deletion letter approved, the odds are low. This is primarily because most debt collectors are under contract with the credit bureaus to provide unconditionally accurate information. Deleting legitimate negative information undermines this arrangement. Your time may be better spent taking concrete steps to repair your bad credit that are more likely to produce results.



Written By:

Mark P. Cussen, CFP® , CMFC

LinkedIn

Mark has over 25 years of experience in the financial industry, and has worked with investments, insurance and mortgages as well as income tax preparation and comprehensive financial planning. His writing work includes insurance and securities training manuals and educational art... read more about Mark P. Cussen, CFP® , CMFC

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