I am so upset right now! I just applied for a mortgage and was turned down because of 3 medical collection accounts on my credit reports. All of the accounts are from the same collection agency. The worst part is that I didn’t even know these accounts existed. They are from an ER visit last year and I gave my insurance information to the hospital when I was treated. I called my insurance company and it turns out that I had a deductible on some of the tests which I was responsible to pay myself. But the hospital never let me know that I still owed a bill! The just put collection accounts on my credit and destroyed my credit scores. I read online that I should try to work out a “pay for delete” deal with the collection agency but when I called the collection agency they said no. What can I do?”
Questions regarding the “pay for delete” collection removal strategy are some of the most common questions that myself and our other credit experts at HOPE4USA receive. The scenario above is a very common occurrence and, as you can imagine, it can be truly heart breaking to find out you do not qualify for a mortgage due in large part to collection accounts you never even knew existed. While it is never a bad idea to settle a legitimate debt, the reality is that simply settling the debt will not do much to help your credit scores. The balance of a collection account is not the primary factor which lowers a person’s credit scores, but rather it is the fact that the delinquency occurred in the first place. Settling an account does not erase the delinquency. Because of this fact, many online forums suggest the “pay for delete” strategy.
Is “pay for delete” real? Can it help your credit? Plus, what is a “pay for delete” in the first place? Let’s take a look.
What Is a “Pay for Delete” Deal?
The term “pay for delete” is used to describe the action of paying off a collection account in order for the account to be deleted from your credit reports. First of all, it is true that “pay for delete” deals actually exist. However, they are extremely difficult to obtain and even harder to uphold if the collection agency decides not to honor the agreement after receiving payment.
Why “Pay for Delete” Deals Are So Rare
“Pay for delete” deals are not illegal. That is a myth, regardless of where you may have heard it. However, “pay for delete” deals are frowned upon very heavily by the credit reporting agencies themselves – Equifax, Trans Union, and Experian. Collection agencies depend heavily upon the ability to report to the credit bureaus in order to remain profitable. After all, the fact that the collection account is damaging their credit scores is the #1 reason which motivates consumers to pay collection agencies. In order to report accounts to the credit bureaus, collection agencies must sign service agreements. Most of these agreements have language which directly warns collection agencies not to delete paid accounts from consumer credit reports. If a collection agency is caught deleting paid accounts from credit reports then they could actually lose their account with the credit bureaus.
Why “Pay for Delete” Deals Are Hard to Enforce
Sometimes collection agents will agree to a “pay for delete” deal in an effort to collect payment from a consumer. Collection agents work on commission and, let’s face it, many times they are dishonest and manipulative in their debt collection attempts. Over the years I have personally spoken with many people who had a collection agent agree to “pay for delete” only to leave the collection account on the credit report after payment was received. If you do negotiate a “pay for delete” deal with a collection agency, then it is absolutely crucial to get the agreement in writing before you release any funds for payment.
Sadly, even if you receive the agreement in writing the collection agency may not honor the agreement. If the collection agency chooses to go back on their word they you have little recourse with the credit bureaus either. The credit bureaus will not likely honor a “pay for delete” agreement, even in writing, since you are asking for accurate information to be removed from your credit reports. (If you are requesting for an inaccurate account to be deleted from your credit then that is a different story.) However, promising a “pay for delete” and refusing to honor it after receiving payment could be interpreted as a violation of the Fair Debt Collection Practices Act (FDCPA). You can pursue FDCPA violations in court.
Think you have a good claim for an FDCPA case? EMAIL US for a referral to a reputable FDCPA attorney who may be able to help you.
There Is Still HOPE!
Just because pinning all of your hopes on a “pay for delete” negotiation strategy is not a good plan does not mean that you are out of options. If your credit is not strong enough to qualify for a loan you should look at your total credit picture with a reputable credit professional. Yes, the “pay for delete” strategy is a long shot but there are literally dozens of effective ways to strengthen your credit reports.
CLICK HERE to schedule your no-obligation credit analysis and review your options today.
Think you may have collection accounts harming your credit scores? CLICK HERE to see your 3-bureau credit scores right away.
Michelle Black is an 12+ year credit expert with HOPE4USA, the credit blogger at HOPE4USA.com, a recognized credit expert on talk shows and podcasts nationwide, a contributor to the Wealth Section of Fort Mill Magazine, and a regularly featured speaker at seminars up and down the East Coast. She is an expert on improving credit scores, budgeting, and recovering from identity theft. You can connect with Michelle on the HOPE Facebook page by clicking here.