You’ve begged and pleaded with the creditor to remove a delinquent account from your credit report. But they insist the account is now with a debt collector, and you must deal directly with them to resolve the matter.
You could just wait for seven years until it falls off your credit report. However, the collection account is such an eyesore that’s dragging your credit score down and you’d prefer to deal with it sooner than later. Or maybe you’re applying for a mortgage and you have no choice but to address the account or you won’t get approved.
One option: a pay-for-delete letter. You don’t have to hire a credit repair company to do the legwork and it won’t take much of your time. Keep reading to learn more about how these letters work and view a sample template to help you get started.
What Are Pay-For-Delete Letters?
A pay for delete letter is a document consumers draft up and send to debt collectors requesting the removal of collection accounts in exchange for payment. While you’re not admitting that you owe the amount in question, you’re agreeing to pay the balance in full or at least a portion to the collection agency. Note, pay-for-delete letters are different from goodwill letters. Goodwill letters are a written request you draft up showing you’re aware of a late payment noted on your credit report and would like to have the negative mark removed as a professional courtesy since the account is now in good standing.
The latter is usually the most common approach since most delinquent accounts are sold to collection agencies for pennies on the dollar. This means they are more inclined to accept whatever they can get since the odds of collecting aren’t in their favor. And if you know you owe the debt but aren’t willing to admit it, the least you could do to boost your credit score is pay a small amount to have it removed.
There is a template you can swipe from this article to help you get started. Keep in mind you’ll want to customize the contents to make the letter unique to your situation.
Quick note: If the collection account does not belong to you or is not being reported correctly, it’s best to file a dispute.
Do Pay-For-Delete Letters Work?
If you were to call up the collection agency and ask for a pay-for-delete arrangement, chances are they’ll deny your request right away. Why so? Well, most will tell you it’s illegal, but the reality is they don’t want to deal with the credit reporting agencies to remove the account from your credit report.
That’s why it’s best to proceed in writing as you’ll find money is the top motivator for select debt collectors and they’ll go to extreme measures to get it. This means better approval odds for you, especially if they know you probably won’t pay if they don’t accept your offer.
How much are you willing to pay?
Do you have the cash on hand to pay what you propose right away? When you connect with the debt collector and tell them that, it’s music to their ears. But whatever you do, don’t cave and pay without reaching an agreement.
It’s clear to them that you can afford to pay something towards the debt if you’re proposing a pay-for-delete arrangement, but don’t let them swindle you into paying on the account and not get anything in return. Stick to your guns and try again if you have to.
How to Write a Pay-For-Delete Letter
It shouldn’t take more than an hour of your time to draft up a pay-for-delete letter. But before you get started, you want to confirm the debt collector you’re reaching out has legal rights to the debt. You can do this by:
- Requesting that they verify the debt. You can call them, but it’s best to submit a written request via postal mail so you’ll have a paper trail. In a nutshell, a debt verification letter will include a statement from the company requesting payment, along with any key details regarding the debt. They should also send you a copy of the bill, statement, or whatever proof they have you allegedly owe the debt and they have legal rights to collect on it.
- Filing a credit report dispute and awaiting the results. This approach is best if the collection account is listed with multiple agencies and you want to get to the bottom of who owns the debt at the moment. That way, you won’t waste your time or money dealing with a debt collector that has no claims to the debt. And your score may improve because the other entries related to the collection account will fall off your credit report.
Once you have proof in hand, the next step is to determine how much you can afford to pay the debt collector to settle the debt and have it removed from your credit report. If they agree, prepare to fork this amount over right away. Otherwise, don’t bother making an offer or you could blow your chance.
Are you wondering how much to offer? As mentioned earlier, debt collectors acquire bad debts for pennies on the dollar, so start at 50 percent and negotiate from there, especially if the debt is older.
To illustrate, if the balance on a three-year-old collection account is $5,000, you could offer $1,500 and see what response you get. The debt collector could approve your request right away. Or maybe they will counter with $2,000. If the latter happens, you’re still coming in at $500 below what you can comfortably afford to pay.
Contents of the Letter
Your pay-for-delete letter should contain:
- Name and address
- The collection agency’s name and address
- Account number (listed with the collection agency)
- Original creditor’s name
- Alleged outstanding balance
- A request that the collection account is removed in exchange for payment; (This is not an admission you owe the debt).
- The amount you’re willing to remit in exchange for the removal of the collection account
- The payment method you plan to use if the request is approved
- The expiration date for your offer
[Collection Agency’s Name]
[Collection Agency’s Address]
[Alleged Outstanding Balance]
Original Creditor: [Original Creditor’s Name]
Dear [Collection Agency’s Name],
Upon reviewing my most recent credit report, I noticed an outstanding balance for a collection account I allegedly owe your company. The account initially belonged to [insert original creditor’s name].
I am in no way assuming responsibility for or ownership of this debt. However, I wish to propose a monetary offer in exchange for a settlement of the debt and acceptance of the terms listed below:
- The amount remitted will be considered “payment in full” for the outstanding balance and prevents the debt from being resold to another entity.
- The terms and conditions of the arrangement are to not be disclosed to any third parties.
- Once your company is in receipt of payment, you agree to remove the collection account and any corresponding information from my credit reports. This includes reports listed with Equifax, Experian, and TransUnion.
- You agree to refrain from reporting the account again as “settled for less than owed” or “paid in full” to the credit reporting agencies once it is removed from my credit report.
Assuming you agree to the terms and conditions presented, I will make a payment in the amount of (insert amount). Payment will be remitted by [insert preferred payment method, but keep in mind that most collection agencies prefer guaranteed funds i.e. money orders and cashier’s checks].
In summary, I’d like to emphasize that this letter is not an admission of responsibility for the debt I allegedly owe nor a promise to pay. It’s simply a request to settle the balance in exchange for your willingness to meet the terms and conditions outlined above.
This offer is valid for [insert number of days] days. Please reply via a written document on company letterhead if you are interested in moving forward. I am also requested that the document be signed by a member of upper-management that has the authority to abide by the terms and conditions of this agreement.
I appreciate your time and prompt attention to this matter. Thanks in advance for your willingness to review my request.
[Your typewritten name]
What to Expect After Sending Off Your Letter
Assuming that the debt collector will entertain your request for a pay-for-delete arrangement, they should respond in writing with a counter-offer or instructions on how to move forward. They may also toss your letter in the trash, which means you should return to the drawing board and revise your offer. The good news is even if it doesn’t work out the first time around, you may eventually get the result you’re looking for if you remain persistent and don’t throw in the towel to prematurely.
Can You Set Up a Pay-For Delete Agreement by Phone?
It’s an option, but it’s best to get the agreement in writing to solidify the deal. Otherwise, the debt collector can tell you exactly what you want to hear to get ahold of your hard earned cash and not uphold their end of the bargain.
What To Do If The Debt Collector Refuses to Remove the Account
There’s always a possibility that the debt collector won’t remove the collection account even after they’ve received payment. If you run into this issue, contact them right away and kindly reiterate the terms of the agreement. If they still refuse to take action, you can hire a reputable credit report company to lend a helping hand. And if you really want to step it up a notch, consult with an attorney to inquire about remedies that may be available to you.
Should Pay-For-Delete Letters Be Used For Old Accounts?
It depends on the time that has passed since the original date of delinquency. By law, the collection account will remain on your credit report for seven years. But as the reporting timeline progresses, the impact of the negative mark will dwindle and you will slowly be able to rebuild your credit.
Quick note: Be careful not to confuse the reporting timeline with the statute of limitations. The latter is the timeframe that debt collectors can hound you for the outstanding balance. This window varies by state.
If it’s been several years and your score is on the mend, a pay-for-delete letter may not be worth the hassle. An exception to the rule: if you’re applying for a mortgage and the account has to be settled or paid in full for the loan to be approved. Here, it’s sensible to try this approach and see if you have success.
You’ll have to pay something, but it’s better to get the account removed in return for your payment. Why so? Collection accounts that are “settled” or even “paid in full” don’t help your credit report. The status simply updates and your score stays the same. But removing the account could give your score a nice boost, particularly if it’s a newer entry on your credit report.
Have you tested your luck with a pay-for-delete letter? Did it work out for you? Please share in the comments below.