Pay For Delete

Everyday I’m in this business I hear people giving bad advice. The one piece of bad advice that I hear the most is that you must wait 7 years to have negative credit removed from your credit report. It really depends on the trade line in question.

Some of the ones you can’t change:

Chapter 13 Bankruptcies will remain on your credit report 7 years.
Chapter 7, 11 or 12 Bankruptcies will remain on your credit report for 10 years.
Judgments - 7 years
Paid Tax Liens - 7 years
Unpaid Tax Liens - 15 years
Foreclosures - 7 years (in rare cases, this could be removed)

If you have an unpaid collection on your report than there are several courses of action that you can take try and have the item removed from your credit file.

If your debt has gone to a collection agency than there may be some hope to have this negative item removed from your credit report. Hopefully you have not already started making payments or have had any verbal or written communication with the collection agency, or you may not be able to use this technique.

You can try and negotiate with the collection agency verbally or by written letter but you must ABSOLUTELY get there response in writing. I suggest that all communication be in writing so you don’t accidentally say the wrong thing. I will put some links to some “Pay for Delete” sample letters at the end of this post.

First, always try and negotiate to pay pennies on the dollar, and not pay in full. Let me pause here and say that I would normally feel guilty not paying my debt in full, but understand that the collection agency paid pennies on the dollar to get this collection. Why should they make a profit? In your negotiation with the collection agency, ask them for a “Pay for Delete”.

Essentially in negotiating to pay off this debt (hopefully for less than the original amount), you are asking them to remove the trade line from your credit report completely. Even if you have to pay the full amount, this will really help your credit score.

The next best thing will be to get the collection marked as “Paid Satisfied”. This won’t nearly help your credit score as much as getting it completely removed but it’s better than “unpaid”. Some collection agencies just won’t bargain with you for “pay for delete”, so this is next ideal situation.

Remember, you need to get something for paying the debt. If the debt has been around for many years you might want to check the Statute of Limitations. This is the amount of time that passes by when this debt can’t be collected upon (so no reason to pay it). Don’t confuse this with how long it can be reported on your credit report.

Remember don’t make any payments or promises until you have seen a letter in writing from the collection agency with the exact terms.

If you found this blog post in an effort to repair your credit (and trust me you’re not alone), then I highly recommend looking into the Credit Secrets Bible. It’s just a great product (books, CD’s and support), you really can’t miss for the price. This topic along with tons of other techniques and information on Credit Repair are to be found here. It’s what I used to turn around my credit.

Check out this great sample “Pay for Delete” letter at MyFico.