“Pay for delete” can mean two things: a shady “credit repair” company promising to remove negative credit-report information for a fee, or a debt collector promising favorable credit-report treatment in exchange for prompt payment of the balance due, plus a fee. Neither scenario, especially the first, is aboveboard. There’s no amount you can pay — other than what you owe, which helps only to a certain extent — to improve your credit score. So, consider “pay for delete” to be more of a trick than a treat.
Below, we’ll take a closer look at both types of “pay for delete” schemes as well as legitimate alternatives.
How Pay For Delete Works (And Doesn’t Work)
Credit-repair companies have a history of preying on people who are desperate for a credit-report makeover yet unaware of how credit improvement really works. For example, they might tell you a small up-front payment is all that’s standing between you and a clean credit report. But they don’t actually have the power to do what they promise.
Most importantly, credit-repair companies can’t simply delete records from your reports. Only the credit bureaus and data furnishers (your creditors and/or lenders) have a hand in that and only when the information is inaccurate or too old. So, if credit-repair services do anything, they’ll merely take the same basic steps that are available to consumers for free. This includes disputing mistakes on your credit reports, attempting to suppress fraudulent credit information, and perhaps negotiating settlements for unpaid debts. None of that is worth paying for, especially because it would involve sharing your personal information with an untrustworthy company.
This just goes to show how practically important financial literacy really is. In order to overcome difficulties and achieve lasting financial success, you must understand the basics of credit building and know how to distinguish scams from trustworthy services. If all else fails, just remember: If there’s a charge for credit repair, it’s probably not fair.
Quid-Pro-Quo Debt Collection:
In return for full or partial payment, debt collectors sometimes promise to change how a collections account is classified on your credit reports. And this classification does matter. For example, there is a big difference between a collections account that is characterized as “Outstanding” and one that is labeled “Paid in Full.” Your score will continue to suffer with the first designation, whereas the latter could help prevent further damage.
Given that your creditor or debt collector can influence your account’s status with the information that it reports to the credit bureaus, this can become a bargaining chip in debt negotiations. But the “Paid in Full” classification is not worth paying extra for. As long as you satisfy your obligation and manage credit responsibly moving forward, your credit standing will take care of itself.
Furthermore, some people mistake this as an opportunity to completely remove a problematic account from their credit reports. But once a negative record finds its way onto your credit report, it can only be removed if it’s proved to be inaccurate or once seven to 10 years have passed.
Pay-For-Delete Rules & Regulations
Lenders, debt collectors, and credit bureaus are all closely regulated at the federal and state levels. That means you have certain rights as a consumer as well as a means for recourse if an organization acts abusively.
The following are some of the most notable rules backing you up:
- Credit Repair Organizations Act (CROA): This law requires credit-repair organizations to provide a written summary of your rights and a written contract that you can void within three days of signing. They must also accurately disclose what services they can and cannot perform. And they are prohibited from requiring payment before promised services are completed.
- Fair Credit Reporting Act (FCRA): The FCRA gives you the right to know when information on your credit report causes you to be denied for credit, insurance, or employment. It also enables you to dispute credit-report inaccuracies, while requiring credit bureaus to remove inaccurate, incomplete, or unverifiable information from your files. And those are just a few of its important provisions.
- Local Laws: A variety of state and local consumer-protection laws apply to credit-repair companies and debt collectors that operate within a small geographic area.
For more information, you can check out our credit card and credit report bills of rights.
If you believe that you are the victim of a credit-repair scam, you should check out our tips for spotting scams and also make sure to submit a complaint to the Federal Trade Commission.