What is Pay for Delete?
Pay to delete is a strategy designed to remove a negative item from your credit report through direct negotiation with a collection agency. You agree to pay the collections agency an agreed amount which could be a settlement for less than the original amount if they agree to completely remove an item from your credit report.
How effective is pay for delete?
The fact of the matter is, pay to delete is not really an effective strategy, or worth the hassle, and there a number of reasons for this. Firstly, the entire process is against the credit bureaus’ policy, and they’ve been cracking down on the practice over the last few years.
Secondly, by the time a negative item is marked as a chargeoff by the original creditor on your credit report, the account has already been closed for several months, and the debt has already been handed over to a debt collections agency for action. This means you will now be dealing with the debt collections agency. However, the original creditor is the only one that can remove a negative item from your credit report. The problem is, they would have charged off your account, and have gotten their tax and insurance claim benefit from the write off.
If you pay off an account that is in collections, it will still appear on your credit reports as a paid collection. You would therefore have to negotiate with the original creditor, rather than the debt collection agency to remove the charge off from your account. Pay for delete will not remove the negative information reported by the original creditor. And since the original creditor has written off the debt as a loss, they won’t have any incentive to delete the negative information.
Furthermore, if the debt has been reported by the debt collection agency, paying for a deletion to either party will not remove both debts. In this case, you would have to negotiate removal of the debts with both the original creditor as well as the debt collection agency.
You might even be dealing with a situation where the original creditor has sold the debt to multiple debt collection agencies. If this is the case, before making any payment you will have to question the validity of the debt by requesting a method of verification proof (mov) from the credit reporting agency.
The credit bureaus are required to provide the method of verification that includes the name, address, and telephone number of original creditor who reported the debt. Also, they must prove they received from the creditor a copy of the original dated contract with your signature on it.