We've all had the thought: "If I just ignore these bills for long enough, maybe they'll go away." But, anyone who has tried this tactic knows the cold truth — things just don't tend to work that way.
Like parking tickets and expired milk, ignoring debt only makes it harder to deal with in the future. You may be able to live in ignorant bliss in the short term, but the consequences inevitably catch up.
In fact, when you're worried about how to pay off debt, there's at least one thing you can do fairly quickly that could help resolve the situation. It's called a "pay for delete" letter. Here's how it works and when you might want to consider sending one after being contacted by a debt collector.
What is a pay for delete letter?
When a debt defaults, it's usually sold to a collection agency for a fraction of the total amount owed. So, for example, if an agency spends $1,000 to purchase a $10,000 debt, the agency can then track down the original borrower to pay the full sum of money. Once the borrower pays, the collection agency will have made $9,000 from the deal.
This is where a pay for delete letter can come in handy.
Instead of paying the full amount or creating a payment plan, you could opt to write a letter to the agency, requesting them to remove the defaulted debt from your credit report in exchange for a lump sum of money that completes the deal. This is referred to as a "pay for delete" or "pay for deletion" letter.
While pay for delete letters can work to get a default removed from your credit report, there's no guarantee that your offer will be accepted just because you send one. In fact, some creditors won't approve any pay for delete requests, no matter the circumstance.
How you might use a pay for delete letter
Let's say you default on a $5,000 credit card balance and it gets sold to a debt collection agency who pays $500 for it. The defaulted debt then shows up on your credit report for seven to 10 years, and can negatively impact your credit score.
Instead of waiting years for the default to fall off your credit report, you can try to negotiate with the collection agency to see if they'll remove it early in exchange for repaying a portion of the debt.
Submitting a pay for delete letter using this example could mean offering a lump sum of $2,500 to the agency in exchange for removing the default from your credit report. That way, you'd be free from owing the debt, your credit report will no longer show the default, and the collection agency makes a $2,000 profit.
This practice is fully legal and binding, as long as you get it in writing. Only written agreements can be enforced, so a verbal pay for delete agreement has no merit and can be broken without any repercussions to the lender.
What to include in a pay for delete letter
If you decide to submit a pay for delete letter for consideration, it should be written professionally, with concise and accurate information. Don't embellish, lie, or otherwise misrepresent the situation.
Here's what you should include:
- Your full, legal name
- Your address
- Collection agency's name
- Collection agency's address
- Account number
- Alleged amount owed
While it may seem counterproductive, don't acknowledge that the alleged debt is yours. Instead, request that the lender or collection agency prove that the loan was yours. Your rights under the Fair Debt Collection Practices Act allow you to dispute an alleged debt. If they can't prove it, you might be able to get the loan taken off of your credit report entirely.
Mention any extenuating circumstances that caused you to default on your debt, like getting divorced, losing your job, or suffering a medical emergency. You can also include something like moving to a new city and not having your bills forwarded. If possible, provide proof that these events occurred.
Send the letter through certified mail with a return receipt, which will prove that the lender received your request.
Sample pay for delete letters
[Collection Agency's name]
[Collection Agency's address]
Re: Account number [insert your account number] / Alleged amount owed: [$XXXX]
Dear Collection Manager,
This letter is in response to your [letter / call / credit report entry] related to the debt in the account referenced above. I would like to save us both time and effort by settling this debt.
I do not acknowledge or accept the debt, as I have not received any verification of the debt. This is also not a promise agreement to pay the debt unless you provide a response as detailed below.
I am aware your company has the ability to both report this debt and change the reported listing at the credit bureaus since you provided the initial information on the debt.
I am willing to pay [this debt in full / $XXX as settlement for this debt] in return for your agreement to remove all information regarding this debt from the credit reporting agencies within 15 calendar days of payment. If you agree to these terms, I will send certified payment in the amount of $XXX payable to [Collection Agency's Name] in exchange to have all information related to this debt removed from all of my credit files.
If you accept this offer, you also agree not to discuss the offer with any third-party outside of the original creditor. If you accept the offer, please prepare a response on your company letterhead agreeing to the terms, and have it signed by an authorized agent of your company.
As granted by the Fair Debt Collection Practices Act, I have the right to dispute this alleged debt. If I do not receive a postmarked response within 15 calendar days, I will rescind the offer and request full verification of this debt.
Please forward your agreement to the address listed above. I look forward to resolving this matter in a mutually beneficial way.
Attention: [Collection manager's name]
[Collection Agency's name]
[Collection Agency's address]
Account number: [insert your account number]
Amount as listed on credit report: [$XXXX.XX]
Dear [Collection manager's name],
In reference to the account listed above, I am writing to offer you the opportunity to settle the alleged amount due to our mutual benefit. Please note that I do not accept responsibility for ownership of this debt in any form, and I retain my right to request a full debt verification and validation from your company.
I am, however, willing to pay a significant portion of this account under the following conditions:
- Your company agrees to designate the account as "payment in full" once you have received the agreed upon payment amount. The account will not be designated as a "paid collection" or "settled account."
- Your company agrees to delete all references to this account from all credit bureaus to which you report within 15 calendar days of receiving payment.
- Your company agrees not attempt to sell or transfer this debt to another creditor.
- You company agrees not to discuss this agreement with any third-party outside of the original creditor.
If you agree to these terms in writing, I will pay the amount of $XXXX through money order or certified cashier's check.
Please be aware that this is not a renewed promise to pay. This is a restricted debt settlement offer and you must agree to the terms above in order for payment to be made. If you accept this offer, I require your written agreement to the aforementioned terms on company letterhead, signed by an authorized representative from your company.
The terms of this offer expire after 30 days. I look forward to your prompt and positive response.
Tips for getting your pay for delete letter approved
The more you can offer a creditor, the more likely it is they'll accept your pay for delete request. These companies are in the business of making money, so a lowball offer could cause them to ignore your request entirely.
If your first request is rejected, you might consider offering to pay the full amount due. While doing so won't save you any more on the debt, it will be removed from your credit report and the enticing offer makes a compelling case to the collection agency to approve your request.
What to do if your letter gets rejected
If your pay for delete letter is rejected, you have two options:
- Accept their decision and agree to pay the full amount owed, then wait seven years for the account to fall off your credit report, or
- Send another letter, this time asking for a debt validation letter.
A debt validation letter asks the lender or collection agency to verify your debt and prove that it's actually yours. Essentially, they need to be able to prove that you took out the loan, when you stopped making payments, and when the loan was sold off to a collection agency.
If they can't show solid proof, you can dispute the debt entirely. Even if you know the debt is yours, It's a good idea to ask for proof of debt, because some debt collectors may falsely pretend to own your debt. In some cases, they may own the debt but lack accurate payment records.
Alternatives to pay for delete letters
If your pay for delete request is rejected, you can still offer to settle the debt and pay it off in full. The loan will still remain on your credit report, but it will look better than an unpaid default or settlement.
You can also write a goodwill letter, which is a letter asking the lender to remove the mark. This usually works best when you've made an honest error or gone through a particularly hard time.
If the loan is several years old and still unpaid, it might actually be more beneficial to let it hit the seven-year (or above) mark, at which point the debt falls off your credit report. A consumer who has a five-year-old unpaid debt can wait two years and ask the credit bureaus to remove the loan.
This only works if you don't need to improve your credit score in the meantime. If you're looking to buy a house, refinance a student loan, or take out a home equity loan, be aware that an unpaid debt could disqualify you from loan approval. If you're looking for a new job, be aware that some employers will check your credit report and could choose to rescind a job offer upon discovering your unpaid loans.
FAQs about pay for delete letters
Should I hire a company to send a pay for delete letter?
There's no shortage of third-party companies out there who will handle submitting a pay for delete letter on your behalf, but besides saving a few minutes of your time, it's probably not worth it. Not only is there no guarantee it will work, it's also very simple to do yourself.
Following a simple template, like the sample letters above, can give you the same rate of success as hiring a company to do it for you. Plus, no one knows your financial situation better than you.
Does a pay for delete letter increase your credit score?
Not all creditors will accept a pay for delete letter, but it may be worth a try in some situations. If a creditor accepts your offer and deletes the delinquency from your account, you could see a modest increase in your credit score. However, the impact to your score depends on what credit scoring model is used and how old the debt is.
Are pay for delete letters a good idea?
The latest credit score models from FICO 9 and VantageScore 3.0 exclude paid settlements from your credit score. That makes a pay for delete request redundant, since a paid collection has no bearing on your credit score.
Not all lenders use these new credit score models, though, so it might still be worthwhile to ask for a pay for deletion.
Is pay for delete illegal?
Sending a pay for delete letter is not illegal. However, the major credit bureaus — Experian, Equifax, and TransUnion — frown upon the practice. The credit bureaus have started cracking down on agencies that accept pay for delete letters, as it impacts the reliability of the companies’ credit scores.
How many points will my credit score increase if a collection is deleted?
Although a pay for delete letter can help boost your credit score, the boost will likely be modest at best. If you make a deal with a collection agency, the original debt, along with your missed payments, will still be on your credit report. And if you have multiple past-due accounts, having one deleted will have little impact on your credit score.
Do pay for delete letters really work?
pay for delete letters can work, but it’s uncommon. You usually cannot get delinquent loans or credit card debt deleted, but you may be able to negotiate smaller accounts, such as cell phone bills or utility bills.
Does Capital One do pay for delete?
In most cases, large banks and financial institutions such as Capital One are unlikely to accept pay for delete letters. However, if the company sells your debt to a collection agency, you may have a better chance of success.