A bad credit score can work against you in more ways than one. Getting approved for new loans or lines of credit may be difficult, and even if you qualify, you'll probably 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 and higher premiums on insurance.
In that situation, you might consider a tactic known as "pay for delete," in which you pay to have certain 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 negative information from your credit report.
- Credit reporting laws allow 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, then asking for it to be removed.
- You can do your own credit repair at no cost, but it can be time-consuming.
What Is Pay for Delete?
What is pay for delete? "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," says Paul T. Joseph, attorney, CPA, and founder of Paul T. Joseph Tax Law in Williamston, Michigan,
How to Request Pay for Delete
To ask for pay for delete, you'll need to send a letter to the creditor or debt collection agency. A pay for delete letter should include:
- Your name and address
- The creditor's 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 items that 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 show 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 how your credit information can be collected and sold. 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 in Decatur, Georgia.
Credit bureaus are required to provide accurate information, and consumers have the right to dispute anything they believe to be inaccurate, which the bureau must then investigate in a timely manner. If a credit bureau fails to follow the FCRA rules, the consumer can sue.
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."
Removing Collection Accounts From a Credit Report
Whether your attempts to use 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 to keep in mind, however, is that pay for delete with a debt collector may not remove negative information on your credit history that was reported by the original creditor. The creditor may claim that its contract with the debt collection agency prevents it from changing any information that 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 affecting your credit score. For instance, the FICO 9 credit scoring model that's used by some lenders doesn't factor paid collection accounts into credit score calculations. So if you've paid off or plan to pay off a collection account, then 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 (that is, 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 the debt.
Removing Bad Credit History With Credit Repair
Hiring a credit repair firm is another option for paying to delete bad credit information. Credit repair companies "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.
The fees that credit repair companies charge 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 from $30 to $100, although some companies charge more.
When considering the fees, it's important to weigh what you're getting in return. According to the Consumer Financial Protection Bureau, credit repair companies 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 inaccurate negative 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 company is worth your money, you'll want to thoroughly research any you're considering. Joseph says most credit repair companies are legitimate, but if you come across one that's making promises that seem too good to be true, that's a red flag that it might be a scam, according to the Consumer Financial Protection Bureau.(Investopedia publishes a regularly updated list of best credit repair companies.)
Also, consider the timing before pursuing credit repair services. "After several years of [a negative item] being on your report, the negative impact on your credit score has likely passed," McClelland notes. In addition, negative information will eventually fall off your credit report automatically.
Repairing Bad Credit Yourself
If you would rather not use pay for delete or pay a credit repair firm, there are steps you can take to begin getting your credit back on track:
- Review your credit reports for inaccurate negative information. If you find any, you can initiate a dispute online with the credit bureau that's reporting the information. The major credit bureaus explain the necessary steps on their websites.
- 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 every month. 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 can allow you to pay off debts for less than the total you owe.
- Focus on paying down balances on any credit card or loan accounts that you have open to improve your credit utilization ratio.
How Can You Get Copies of Your Credit Report?
You can get a free copy of your credit report from each of the three major credit bureaus at least one a year through the official website, AnnualCreditReport.com.
What Do Credit Repair Companies Charge?
Credit repair companies typically charge an upfront fee plus ongoing monthly fees of $30 to $100 depending on the package of services they offer.
How Long Does Negative Information Stay on Your Credit Report?
Late payments and collection accounts can stay on your credit reports for up to seven years. A bankruptcy filing can stay on it for up to 10 years.
The Bottom Line
Bad credit doesn't have to be permanent. There are things you can do, including pay for delete, to improve your credit history. Paying to have bad credit removed from your credit reports can be effective, but it's worth exploring other options if you don't have money to pay off an outstanding balance or to cover the pricey fees that credit repair companies can charge.