A collection account can wreak havoc on your credit score. These derogatory entries appear when you fail to pay your creditors and those creditors sell your debts to third-party collectors. Although all collection agencies differ, some will agree to a “pay for delete”–a process in which you pay off the debt and the collection agency deletes the collection account from your credit report. Not all collection agencies, however, will modify your credit records in exchange for payment.
Few collection agencies, if any, grant a debtor’s initial request for a pay for delete. Most individuals that obtain these agreements only do so after multiple attempts. If the collection agency denies your first request, you should call back and ask to speak to a supervisor. Collection agency supervisors are authorized to make decisions regarding whether or not to delete the collection from your credit report in exchange for payment.
In general, the older your debt is, the higher your chances of obtaining a pay for delete. If your state’s statute of limitation has passed, the collection agency cannot legally sue you and collect the debt by force–giving you greater leverage when negotiating a pay for delete.
If this is the case in your situation, your state laws protect you from a collection lawsuit–giving you little incentive to pay off the account without receiving something in return. Sometimes pointing this fact out to the collection agency will render them more willing to negotiate with you and delete the derogatory trade line.
Updating vs. Deleting
If the collection agency will not agree to a pay for delete, that does not mean they will not note the fact that you paid the debt on your credit report. An ethical collection agency will update your credit report to reflect that the debt was paid, and you will look more responsible to other lenders by paying off your collection account rather than ignoring it.
Settling collection accounts is not the same as paying them in full. You are more likely to get the results you want by paying off the debt. If you must settle the debt, you can still negotiate with the company regarding how it reports the account. For example, you can propose that the company agree to report the debt as “paid in full” when it was actually settled.
Federal Reporting Period
The collection agency does not have to agree to delete its trade line for the derogatory notation to eventually vanish from your credit history. The Fair Credit Reporting Act (FCRA) sets the limit for all creditor reports. According to the FCRA, a collection account can only appear on your credit history for seven years and 180 days from the date you defaulted on your original obligation. Nothing you do can reset the federal reporting period. Once the reporting period for the collection account expires, the credit bureaus must remove it from your record–whether the collection agency agreed to a pay for delete or not.
- Bills.com: Pay for Delete Letter
- MSN Money: Is There a Statute of Limitations on Debt?
- MSN Money: When Paying Bills Can Hurt Your Credit
- Federal Trade Commission: The Fair Credit Reporting Act (Section 605/p. 22)
- Consumer Financial Protection Bureau. "How Do I Dispute an Error on My Credit Report?" Accessed April 29, 2020.
- Lexington Law. "Pay for Delete Letter Template for Credit Repair." Accessed April 29, 2020.
- Consumer Financial Protection Bureau. "What Is a Debt Collector and Why Are They Contacting Me?" Accessed April 29, 2020.
- Consumer Financial Protection Bureau. "What Is the Best Way to Negotiate a Settlement With a Debt Collector?" Accessed April 29, 2020.
- IRS. "About Form 1099-C, Cancellation of Debt." Accessed April 29, 2020.
Ciele Edwards holds a Bachelor of Arts in English and has been a consumer advocate and credit specialist for more than 10 years. She currently works in the real-estate industry as a consumer credit and debt specialist. Edwards has experience working with collections, liens, judgments, bankruptcies, loans and credit law.