April 2021

A bad credit score can work against you in a number of ways. When your credit is low, it can be difficult to get approval for new loans or new lines of credit. If you qualify, you may have to pay a higher interest rate to borrow. A low credit score can also result in the payment of higher security deposits for utilities or mobile phone services.

In these scenarios, you may want to consider a tactic known as a pay to delete, in which you pay to have negative information removed from your credit report. While this may sound tempting, it is not necessarily a quick fix for better credit.

Pay to delete defined

First of all, it helps to understand what it means to pay to have bad credit information removed. According to Paul T. Joseph, lawyer, CPA and founder of Joseph & Joseph Tax and Payroll in Williamston, Michigan, “Pay to delete is basically when you are contacted by your creditor, or you contact them, and you agree. to pay some or all of the outstanding balance with an agreement that the creditor will contact the credit bureau and remove any derogatory comments or indication of late payment on the account.

How to request payment for deletion

To request payment for the deletion, you will need to send a written letter to the creditor or the collection agency. A letter of payment for deletion must include:

• Your name and address
• Name and address of creditor or collection agency
• The name and account number you are referring to
• A written statement stating how much you agree to pay and what you expect in return from the creditor removing negative information

You’re essentially asking the creditor to remove any negative remarks they might have added to your credit report related to late or missed payments or a collection account. By paying some or all of the outstanding balance, you hope that the creditor will show goodwill and remove the negative information from your credit report for that account.

Is Paying To Remove Legal?

The Fair Credit Reporting Act (FCRA) governs credit laws and guidelines. Anything a debt collector, creditor, or credit bureau does regarding a credit report will be FCRA-based, says Joseph P. McClelland, consumer credit attorney in Decatur, Ga.

Credit bureaus are required to produce accurate credit reports, and consumers have the right to sue creditors and credit bureaus in certain cases. Specifically, this includes inaccurate information that continues to be reported after a consumer initiates a dispute that the creditor or the credit bureau failed to investigate.

Technically, payment for deletion is not expressly prohibited by the FCRA, but it should not be viewed as a blanket card without credit. “The only items you can remove from your credit report are the ones that are inaccurate and incomplete,” says McClelland. “Everything else will be at the discretion of the creditor or the collector. ”

Remove collection accounts from a credit report

The success of your removal payment attempts may depend on whether you are dealing with the original creditor or with a debt collection agency. “As for the debt collector, you can ask him to pay for the deletion,” says McClelland. “It’s completely legal under FCRA. If you go that route, you’ll have to get it in writing, so you can apply it after the fact.

What to keep in mind, however, is that paying to delete with a debt collector may not remove negative information about your credit history that was reported by the original creditor. The creditor may claim that his contract with the collection agency prevents him from changing any information that he has reported to the credit bureaus on the account. That said, some collection agencies are taking the initiative and requesting that negative account information be removed for customers who have successfully settled their collection accounts in full.

Before taking this step, think about the impact that collection accounts can have on your credit score. The FICO 9 credit scoring model, for example, does not take into account paid collection accounts in credit score calculations. So if you have paid or are planning to pay a collection account, you may not need to pay to delete if your only goal is to improve your credit score.

Remove Bad Credit History With Credit Repair

Hiring a credit repair company is another option to pay for removing bad credit information. “Credit bureaus basically do the job for you by contacting the credit bureaus and objecting to errors in the report or requesting that false or incorrect items be removed from the report,” McClelland explains. In this case, you do not necessarily pay off the outstanding balances. However, you will have to pay a fee to the credit repair company to act on your behalf and remove the negative information.

The fees charged by a credit repair company can vary. Typically, there are two types of charges: an initial setup charge and a monthly service charge. Upfront fees can range from $ 10 to $ 100, while monthly fees typically range from $ 30 to $ 100 per month, although some companies charge more.

When considering fees, it’s important to weigh what you’re getting in return. According to the Federal Trade Commission, there is nothing legally credit repair companies can do for you that you can’t do on your own. You just need to be prepared to spend time reviewing your credit reports for negative or inaccurate information, contacting credit bureaus to dispute that information, and following up on those disputes to make sure they do. under investigation.

If you decide that the time saving aspect of working with a credit repair company is worth your money, then do a thorough research on any companies you are considering to make sure that you will be working with one of the best repair companies. credit available. Joseph says that most credit repair agencies are legitimate, but if you come across one that makes promises that sound too good to be true or uses methods to repair credit that are not covered by FCRA, that is is a red flag that the company could be a con.

Also consider the timing before pursuing credit repair services. “After several years of being on your report, the negative impact on your credit score has probably passed,” says McClelland. This is because negative information can eventually automatically fall on your credit report.

Fix bad credit yourself

If you’d rather not pay to remove or pay for a credit repair business, there are a few steps you can take to start getting your credit back on track:

• Review your credit reports for negative information that is inaccurate. File a dispute for inaccuracies or errors online with the credit bureau reporting the information.
• Consider asking someone you know with a strong credit history to add you to one of their credit cards as an authorized user. This can transplant that person’s positive account history into your credit report.
• Look for credit loans and secured credit cards as additional credit building options.
• Make a habit of paying your bills on time every month. Payment history has the biggest impact on credit scores.
• Weigh the pros and cons of debt settlement to resolve collection accounts or write-offs. Debt settlement allows you to pay off debts for less than what is owed.
• Focus on paying off the balances of any credit card or loan accounts you have opened to improve your credit utilization rate.

The bottom line

Bad credit doesn’t have to be a permanent situation. There are things you can do, including pay to delete, to help get your credit back. Paying to get bad credit removed can be effective, but it’s worth exploring other options if you don’t have the money to pay off an outstanding balance or cover expensive costs that a credit repair company does. can charge.