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.
Unless you’re a victim of identity theft or fraud, 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. This article contains the tools that will help you settle and delete collections in order to repair your credit rating.
All types of recent collections or small older collections. Not for questionable older larger amount collections, especially those 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”.
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
Guide to Pay for deletes
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.
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.
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:
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.
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.
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.
Now if you’re overwhelmed by the suggestions above, or you’re finding a creditor hard to deal with, then it may be time to hire a professional.
So here’s what I suggest you do next:
Ok, so whether you take the self-help route or hire a professional really depends on your personal situation, budget, income, and the complexity of the collection.
I’ve designed this quiz to help you make the best decision: