The Facts on “Pay for Delete”

Settling a collection account for less than the full amount owed can be a godsend when you’re overwhelmed with debt. But the downside is that you incur credit damage for each account you settle. Tricks like “pay for delete” may sound like they can help you avoid that credit damage, but the reality often isn’t all it’s cracked up to be. This is what you need to know…

What is pay for delete?

Pay for delete refers to the process of getting a debt collector to remove collection account removed from your credit report. It’s a point you can use during a debt settlement negotiation, as you settle a debt for less than you owe. You agree to pay a certain amount of money in your settlement. In exchange, the collector agrees to remove the collection account from your credit report. In some cases, a collector may require a debt to be paid in full to agree to remove the account.

How do collections affect your credit?

When a creditor sells a debt to a third-party lender, a collection account appears in the public records section of your credit report. This account remains on your credit reporting for seven years from the date the debt first became delinquent. So, once you settle a debt to get rid of it. The credit notation about that account sticks around for another seven years after that.

Collection accounts are bad for your credit history, which is the biggest factor used to calculate your credit score. As a result, collection accounts can significantly drag down your credit score.

Is it really possible?

In theory, yes. In fact, it used to be a negotiating tactic that settlement companies would use to get consumers to pay a higher percentage of the debt owed. They would offer to remove the collection account if you agreed to pay a higher percentage of the balance owed.

However, in 1970, Congress enacted the Fair Credit Reporting Act to promote “accuracy, fairness, and privacy of information in the files of consumer credit reporting agencies.”^[1] The goal of the law was to protect Americans from inaccurate reporting. For instance, it allows you to correct mistakes in their credit report through the process of credit repair.

However, an offshoot of the law is that it requires “data furnishers” to provide accurate information to credit reporting agencies. This means lenders, creditors, and debt collectors must, by law, report accurate information. If they don’t, they can lose access to consumer credit reports entirely.

What this means for consumers

The FCRA allows creditors and debt collectors to amend what they have reported to the credit bureaus. This is the process that allows them to correct errors when they happen. However, the FCRA stipulates that data furnishers must report information accurately. So, pay for delete skirts a legal line. You legally incurred the collection account. Thus, you legally incurred the negative credit report item that it generates.

By the strict letter of the law, credit bureaus can decide to bar a debt collector from accessing and consumer credit files, if they are found to be providing false information. In this case, reporting that there wasn’t a collection account could be considered falsifying information. So, collection agencies can hurt their business by granting you pay for delete.

As a result, pay for delete is really iffy, even if a collector says they’ll do it. They may remove the collection account from your report right after the settlement. However, then it can reappear later.

If it does, you have no legal recourse because the collection account was reported accurately. So, you can end up paying a higher percentage of your balance to get pay for delete, only to lose that benefit later. And there’s nothing you can do to get it or the extra money you paid the collection agency back.

Is it even worth trying?

This depends on your goals. If you’re using debt settlement, your goal is usually to get out of debt as quickly as possible, for the least amount possible. Your credit score often isn’t a big concern, because your score has already been dinged by delinquent payments and collection accounts. It’s the old adage that you can’t fall off the floor. If your credit is already low, then a few more negative items aren’t going to affect it that much more.

Still, if you’re trying to settle a debt on your own and want to minimize credit damage, it may be worth trying. Some collection agencies will do it and it may even stick permanently. This would help alleviate some of the credit damage that you incurred during your challenges with debt.

How does pay for delete work?

If you’re thinking of trying to negotiate pay for delete, make sure to get everything in writing. You never want to do any debt settlement negotiation verbally over the phone, whether you do pay for delete or not.

1. If a debt settlement company contacts you by phone, ask them to send you a letter with their offer. It may sound old-school, but all communication should use physical mail.
2. Read their offer when you receive it, checking to see if they make any mention of deleting the account in exchange for payment.
3. If it doesn’t, write them a debt settlement counteroffer letter offering to pay that amount in exchange for removing the account.
4. If you want to initiate pay for delete settlement, use this letter to make the initial offer.
5. Once the debt settlement company agrees, they should draft up an official debt settlement offer with the terms of the settlement outlined.
6. They’ll send you a copy that you sign, then copy and send it back. Make sure to keep the originals for your own records.

Again, keep in mind that pay for delete skirts a legal line. So, even getting pay for delete written in an offer won’t guarantee you have legal recourse later if the account reappears. A contract can’t have terms that violate the law. And since the Fair Credit Reporting Act says that collection agencies must report information honestly, you won’t be able to sue them for not holding to pay for delete.

In other words, if you decide to go this route, pay for delete will be a nice boost if it sticks. But go into the settlement process with the understanding that it may not work permanently in all cases. And it may not be worth paying higher settlements for something that may not work.

Debts that don’t require pay for delete to remove credit damage

It’s definitely worth noting that some collection accounts can drop off your credit report without pay for delete. If you meet certain payment requirements for these debts, the credit bureaus will remove them from your report. You won’t have to wait seven years for them to stop affecting your credit score.

Defaulted federal student loans

If you have defaulted on a federal student loan, you can simply make nine consecutive, on-time, full monthly payments in a 10-month period to bring the account current. First, you contact the lender to let them know that you want to rehabilitate the loan. Once you’ve made nine payments on time, the loan will no longer be in default. This is legal and happens with any federal student loan that you rehabilitate.

Medical collections that are paid by insurance

On January 7th, 2025, the Consumer Financial Protection Bureau announced it “finalized a rule to remove medical bills from credit reports.” It’s a move that will impact 15 million Americans collectively on the hook for $49 billion in medical bills. The CFPB says it will “end coercive debt collection practices that weaponize the credit reporting system.”

“People who get sick shouldn’t have their financial future upended,” CFPB Director Rohit Chopra said in a press release. “The CFPB’s final rule will close a special carveout that has allowed debt collectors to abuse the credit reporting system to coerce people into paying medical bills they may not even owe.”

The CFPB press release states the rule will go into effect 60 days from January 7.

If you currently have an unpaid medical bill and are concerned, find out how medical bill can affect your credit here.

How new credit scoring models minimize collection damage

It’s important to note that just because something gets noted on your credit report, this doesn’t mean it will affect your credit score. In addition, some factors affect your score more than others, and collection accounts are beginning to affect your score less and less.

With FICO 9 (an updated version of the FICO credit scoring model), more weight is given to your recent credit history, on-time rental payments are included, and third-party collections no longer hurt your credit score once those debts are paid off.

Be aware that these newer scoring models are not yet as widely used by lenders as previous models. Currently, FICO 8 is the most widely used scoring model in lending decisions. But eventually, most lenders will transition to the newer model, which will be good for consumers.