Many believe that paying off a collection will increase their credit score. However, when you pay off a collection, it gets updated as a “paid collection” on your credit report. It might help in keeping your credit score intact, but it does not increase the credit score. An effective strategy in such a situation is to ask the creditor to remove the account from your credit reports in exchange for paying it off. Collection companies will try to deter you from this adopting strategy, but it is an effective approach to collection accounts. The key is to be persistent and not to give up on the first try. This guide provides you with some resources that will help you remove collections from your credit report with a “pay for delete for collection” letter.
This “pay for delete” strategy works for collection accounts that are a few years past due and past the statute of limitations. In California, the statute of limitations is 4 years. Since collection accounts are better suited for debt validation, it is prudent to adopt this strategy when the debt validation method is not successful. Recent collection accounts are ideal for the “pay for delete” method as these accounts are typically more difficult to remove than older collection accounts with the debt validation method.
Given below are the steps to implement this strategy.
NEGOTIATING A RECENT COLLECTION ACCOUNT
Collection companies such as LVNV Funding, Portfolio Recovery, and NCO Financial buy debt for pennies on the dollar. Thus, these companies will always settle for a lesser amount than the amount you owe the original creditor. Individuals should be aware that their negotiating power increases with the age of the collection account. Thus, the older the collection account is, and the higher the balance, the more negotiating power you will have. For instance, the collection company LVNV Funding will settle a balance of $20,000 that is more than 4 years old for $5,500 or less. However, the same company might not be ready to settle for a small amount if the collection account is recent and has a low balance. To have a better understanding, let us look at the following figures:
- balances of about $900 start with a 40% offer
- If the balance is over $1900, collection companies start with a 30% offer
- for balances of over $3900 a good starting point is 20%
Now that the negotiation basics are covered, let us move to the steps involved in deleting collection accounts:
STEP 1: NOTIFY THE COLLECTION COMPANY OF YOUR "PAY FOR DELETE" OFFER
Scenario A) Collection Company Agrees to the "pay for delete" Offer
Even if the company accepts your offer, it is of paramount importance that they send you a written agreement stating that they have accepted your “pay for delete” offer. The agreement should clearly state that they will remove the account from all consumer reports upon receiving payment. Also, there should be no discrepancy regarding deleting the account and updating its credit report status. The agreement should state that they will delete the collection and not just update it as “paid in full.”
Scenario B) Collection Company Agrees to Offer but does not provide Documentation
If they will not send you documentation agreeing to the “pay for delete” offer, then do not pay the collection right away. Instead, mail them a check and write on “note” section of the check, “cash if and only if you will remove this account from my consumer reports, see attachment.” Enclose the following letter with the check:
(CASH ATTACHED CHECK IF AND ONLY IF YOU WILL REMOVE ACCOUNT FROM ALL CONSUMER REPORTS)
This is to confirm my recent communication with your company’s representative. I am pledging to settle the outstanding debt in exchange for its deletion from all my credit-related consumer reports. Therefore, I include a cheque for $_______________ along with the letter to settle and completely pay off the account with the implicit understanding that the account will be deleted from all my consumer reports. Please be aware that encashing this cheque implies your agreement to remove this collection account from all my consumer reports. If you do not agree to these terms, please return this cheque. In case you fail to remove this account from all my consumer reports after encashing this cheque, it will be treated as a breach of contract. The Attorney General will be notified if such a breach occurs, and a lawsuit in your name will be filed promptly.
If the collection company disagrees to delete the collection account even after receiving the payment, you can engage in a dialogue with them to check if they had sent initial collection notices to your address. If letters were not sent to your current address previously, you can offer to send them proof of your address from that time in exchange for deleting the account. However, if nothing works out, it is better to escalate the request and speak to a supervisor.
STEP 2 CALLING THE ORIGINAL CREDITOR IF THE COLLECTION COMPANY DOESN’T AGREE TO DELETE
If speaking to the collection company’s supervisor does not prove fruitful, you can reach out to the original creditor and inquire about the addresses to which they sent their collection notices. At times, the original creditor may withdraw the account from the collection company and thus, you can pay them directly. Also, the original creditor might instruct the collection company to accept your “pay for delete” offer.