A bad credit score can work against you in more ways than one. When you have poor credit, getting approved for new loans or lines of credit may be difficult. If you qualify, you may end up paying a higher interest rate to borrow. A low credit score can also result in having to pay higher security deposits for utility or cellphone services.
In those scenarios, you may consider a tactic known as “pay for delete,” in which you pay to have negative information removed from your credit report. While it may sound tempting, it’s not necessarily a quick fix for better credit.
- "Pay for delete" is an agreement with a creditor to pay all or part of an outstanding balance in exchange for that creditor removing derogatory information from your credit report.
- Credit reporting laws require accurate information to remain on your credit history for up to seven years.
- Credit repair is paying a company to contact the credit bureau and point out anything on your report that is incorrect or untrue, then asking for it to be removed.
- You can do your own credit repair at no cost, but it can be labor-intensive and time-consuming.
‛Pay for Delete’ Defined
First, it’s helpful to understand what it means to pay to have bad credit report information removed. According to Paul T. Joseph, attorney, CPA, and founder of Joseph & Joseph Tax and Payroll in Williamston, Mich., “Pay for delete is essentially when you are contacted by your creditor, or you contact them, and you agree to pay a portion or all of the outstanding balance with an agreement that the creditor will contact the credit bureau and remove any derogatory comments or indications of late payment on the account.”
How to Request Pay for Delete
To ask for pay for delete, you'll need to send a written letter to the creditor or debt collection agency. A pay for delete letter should include:
- Your name and address
- The creditor or collection agency’s name and address
- The name and account number you’re referencing
- A written statement saying how much you agree to pay and what you expect in return with regard to the creditor removing negative information
You’re essentially asking the creditor to take back any negative remarks it may have added to your credit file in connection with late or missed payments or a collection account. By paying some or all of the outstanding balance, you’re hoping that the creditor will exercise a show of goodwill and remove negative information from your credit report for that account.
Generally, accurate information cannot be removed from a credit report.
Is Pay for Delete Legal?
The Fair Credit Reporting Act (FCRA) governs credit reporting laws and guidelines. Anything that a debt collector, creditor, or credit bureau does regarding a credit report will be based on the FCRA, says Joseph P. McClelland, a consumer credit attorney based in Decatur, Ga.
Credit bureaus are required to produce accurate credit reports, and consumers have the right to sue creditors and the credit bureaus in certain instances. Specifically, that includes inaccurate information that continues to be reported after a consumer initiates a dispute that the credit bureau fails to investigate.
Technically, pay for delete isn’t expressly prohibited by the FCRA, but it shouldn’t be viewed as a blanket get-out-of-bad-credit-jail-free card. “The only items you can force off of your credit report are those that are inaccurate and incomplete,” says McClelland. “Anything else will be at the discretion of the creditor or collector.”
If you spot a credit reporting error or inaccuracy, you'll need to file a dispute with the credit bureau that's reporting the information to have it corrected or removed.
Removing Collection Accounts From a Credit Report
Whether your attempts to pay for delete are successful can depend on whether you’re dealing with the original creditor or a debt collection agency. “As to the debt collector, you can ask them to pay for delete,” says McClelland. “This is completely legal under the FCRA. If going this route, you will need to get that in writing, so you can enforce it after the fact.”
What you have to keep in mind, however, is that paying for delete with a debt collector may not remove negative information on your credit history reported by the original creditor. The creditor may claim that its contract with the debt collection agency prevents it from changing any information it reported to the credit bureaus for the account. That said, some debt collection agencies take the initiative and request that negative account information be deleted for customers who have successfully paid their collection accounts in full.
Before taking this step, consider how collection accounts may be impacting your credit score. The FICO 9 credit scoring model, for instance, doesn't factor paid collection accounts into credit score calculations. So if you've paid off a collection account or plan to, you may not need to pursue pay for delete if your only goal is improving your credit score.
If you're waiting for a debt to become time-barred. i.e. past the statute of limitations in which collection actions can be enforced, it's important to avoid restarting the clock which can occur if you make any promise to pay.
Removing Bad Credit History With Credit Repair
Hiring a credit repair firm is another option for paying to delete bad credit information. “Credit repair agencies essentially do the work for you by contacting the credit reporting agencies and providing objections to errors contained in the report or requesting that items that are untrue or incorrect be removed from the report,” says McClelland. In this instance you’re not necessarily paying off any outstanding balances. However, you will pay a fee to the credit repair firm to act on your behalf in having negative information removed.
$30 to $100
The typical monthly fee for a credit repair company
The fees a credit repair company charges can vary. Typically, there are two types of fees: an initial setup fee and a monthly service fee. The initial fee can range from $10 to $100, while the monthly fee typically runs between $30 and $100 a month, although some companies do charge more.
When considering the fees, it’s important to weigh what you’re getting in return. According to the Federal Trade Commission, credit repair firms can’t legally do anything for you that you can’t do for yourself. You just have to be willing to spend the time reviewing your credit reports for negative or inaccurate information, reaching out to the credit bureaus to dispute that information, and following up on those disputes to make sure they’re being investigated.
If you decide that the time-saving aspect of working with a credit repair firm is worth your money, research any firms you’re considering thoroughly to make sure you'll be working with one of the best credit repair companies available. Joseph says most credit repair agencies are legitimate, but if you come across one that’s making promises that seem too good to be true or using methods to repair credit that aren’t covered by the FCRA, that’s a red flag that the company might be a scam.
Also, consider the timing before pursuing credit repair services. “After several years of being on your report, the negative impact on your credit score has likely passed,” says McClelland. That’s because, eventually, negative information can fall off your credit report automatically.
Late payments and collection accounts can stay on your credit history for up to seven years. A chapter 7 bankruptcy filing can stay on your credit report for up to 10 years..
Repairing Bad Credit Yourself
If you’d rather not pay for delete or pay a credit repair firm, there are a few steps you can take to begin getting your credit back on track.
- Review your credit reports for negative information that’s inaccurate. Initiate a dispute of inaccuracies or errors online with the credit bureau reporting the information.
- Consider having someone you know with a strong credit history add you to one of their credit cards as an authorized user. This can transplant that person’s positive account history to your credit report.
- Research credit builder loans and secured credit cards as additional credit-building options.
- Get in the habit of paying your bills on time monthly. Payment history has the most significant impact on credit scores.
- Weigh the pros and cons of debt settlement to resolve collection accounts or charge-offs. Debt settlement allows you to pay off debts for less than what's owed.
- Focus on paying down balances on any credit card or loan accounts you have open to improve your credit utilization ratio.
You can get one free copy of your credit report from each of the three major credit bureaus annually through AnnualCreditReport.com.
The Bottom Line
Bad credit doesn’t have to be a permanent situation. There are things you can do, including pay for delete, to help your credit recovery. Paying to have bad credit removed can be effective, but it’s worth exploring other options if you don’t have money to pay off an outstanding balance or cover the pricey fees a credit repair firm can charge.