How to Settle a Collection in Exchange for Deletion


If you recently decided to embark on the credit restoration journey by attempting to settle collections that you have on your credit report, you will be surprised to know that paying off the collection may actually decrease your credit score. A collection you pay off will still show on your credit report as a “paid collection,” which will continue to suppress your score. The only way to increase your credit score is to get the account deleted from the credit report in exchange for payment. Most collection companies may not readily agree to do. This article contains the tools that will help you settle and delete collections.

WHAT TYPE OF ACCOUNTS CAN THIS STRATEGY BE USED FOR ?

All types of recent collections or small older collections. Not for questionable older larger amount collections, especially that are past the statute of limitations for your state. In California those are debts that fell behind more than 4 years ago, you can try to validate the debt first instead of paying them. So below are the steps on how to get a collection company to delete an account in exchange for payment, also known as “pay for delete”.

HOW TO NEGOTIATE A COLLECTION AMOUNT DOWN ?

As you are aware all major collection companies small or even big ones like ERC, Midland Credit, Portfolio Recovery will settle for much lower amounts. The rule of thumb is that the larger and older the collection the bigger discount you may get on the settlement. It is not uncommon for Midland Credit to settle a $5000 debt that is over 4 years old to be settled for $1000, which is about 20% of the original amount. Likewise, a smaller debt of $300 that fell behind last month does not leave that much room for negotiation.  As a general rule of thumb, for debts around $1000, start with a 40% offer, for debts over $2000 start with a 30% offer and for debts over $4000 start with a 20% offer. So now that we have this information, below is how you start:

STEP 1: CALL THE COLLECTION COMPANY, OFFER TO PAY IF THEY AGREE TO DELETE

Scenario A) If Collection company say’s they’ll delete:

Now you can ask them to email or fax you an offer letter stating the settlement amount and the promise to delete. Beware: if they say they’ll report the account as “paid in full”, this is NOT a deletion. Once you receive the offer letter, then you can proceed to pay them by phone or any preferred method.

Scenario B) If Collection company say’s they’ll delete but won’t send you something in writing first:

So they’ve verbally agreed to delete the account but won’t give you something in writing first. Here, you want to tell them that you will be mailing them a check instead. On your check’s note section write in, “cash only if you will delete the account from the credit report, see attached letter,” and fill out the letter below and enclose it with your check:

[Your name]
[Your address]
[Date]
[Company Name]
[Company Address]

AC#

To whom it may concern,

(CASH ATTACHED CHECK ONLY IF YOU WILL DELETE ACCOUNT FROM CREDIT REPORT)

To whom it may concern,

As per my conversation with your customer service representative, I am following through on my pledge to settle this debt in exchange for its removal from my credit report. Hence, I am attaching a check for $_______________ to pay off the referenced account under the condition that the account will be removed in entirety from all the three credit bureaus.

If the implied conditions to delete are not acceptable, please return my check. In the event that you cash this check and not remove the collection from my credit report, this will constitute a breach of contract. I will then have to refer this matter to the Attorney General’s office and proceed with filing suit.

Truly,

[your name]

 

Scenario C) If Collection company says the will not delete:

Ask them when and to what address they sent the initial collection notices to and if they had any mail returned to them. If letters were not sent to your current address at the time, you can offer to send them proof of your address from that time if they’ll consider deleting the account. If they don’t agree, then elevate your request further by asking to speak to a supervisor.

STEP 2) CALLING THE ORIGINAL CREDITOR IF THE COLLECTION COMPANY DOESN’T AGREE TO DELETE

You can repeat the prescriptions in Scenario C by calling the original creditor and querying them about the addresses where they sent the collection notices to. Sometimes the original creditor may withdraw the account from the collection company and have you pay them directly, or may instruct the collection company to accept a pay for delete.

FINAL STEP

If all these steps don’t lead to a deletion, then do NOT pay the collection and damage your score. Instead reach out to a reputable, 5-star Yelp Rated company like Imax Credit Repair Firm who have expertise in credit restoration needs and charge you only after they have successfully deleted the accounts from your credit report

If you’re a loan professional,  ACT NOW AND STOP LOSING DEALS, reach out to me HERE or call me at 323-983-8973 to find out how I can help you fund more.

About the Author: Ali Zane

Ali is a credit repair coach, writer, public speaker and consumer advocate for fair credit reporting practices. He's a practicing LDA in California Superior Court and currently serves as the CEO of Imax Credit Repair Firm. More posts by Ali Zane

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