(William from New York) How do you remove a paid debt from your credit report?Dear William:
A paid debt is one that is very much a part of your credit history, and as such it will remain on your credit report for many years. A negative account will drop after 7 years. If you paid off an account and closed it, that payment record will benefit your credit report for 10 years.
Once you have paid off a negative account, then that account should show the final payment and a zero balance. It should also be marked as paid. This is an important item to check, since many collection agencies fail to update your credit record when you pay off an account.
There is a way to negotiate removal of a negative item from your credit report. However, in order to negotiate, you must make sure that the ball is still in your court. If you owe on a defaulted debt and are in position to be able to pay it, then you have some leverage in determining the outcome of the situation. There are two key factors that you may be able to negotiate.
- Payoff Amount: If you owe $1,000 to a debt collector, understand that they likely paid anywhere from $40 to $140 for that debt. Anything the collect in addition to that is a profit. You may be able to convince them to accept a smaller amount in exchange for your upfront, lump sum payment. You can save them the time and cost of continued collection attempts and pricey legal action. Just remember that you might be on the hook for additional income taxes if you negotiate more than a $600 reduction in the debt!
- Removal of Negative Credit Reference: This is precisely what you are looking to accomplish when negotiating a payoff. Once you have completed the payoff of a debt, this is no longer an option. That debt collector is done spending time on your case and they will not help you. Therefore, you must request removal prior to the payoff! Understand that a verbal agreement with a debt collector is as good as a promise from a used car salesman. Get something in writing that shows that the debt collector will delete the record from your credit report upon receipt of $XXX.XX towards that debt. One of the best ways to accomplish this is to send the collector a “pay for deletion agreement.”
Pay for Deletion Agreement
A pay for deletion agreement is a written contract that spells out what the debt collector will do upon receipt of your money. At the end of the day, the debt collector wants to maximize profits as quickly as possible. Many are willing to consider deleting your negative credit reference regarding their firm altogether if you will render a sizable payment promptly.
Once the debt collector agrees to your proposal, make sure that you receive a signed copy before you send payment. Also, make sure that your payment matches what you promised and is in a form that can be tracked. You should either keep a carbon copy of the money order that you sent or a copy of the cancelled check as it appears in your online banking. Follow through to pull your credit report a month later to ensure that they held up their end of the bargain. If not, continue to contact them until they comply with their written agreement.
For a sample pay for deletion agreement, consider searching online for a draft copy. Many attorneys freely post such templates on the Internet. You can simply find one that fits your needs, and then modify it so that it matches your situation. Keep in mind that if you do not negotiate this deletion prior to submitting payment, the chances of getting approval afterwards are very low.
Doing the things you listed above are the best way to get things removed from your credit report. The beauty of the times is the agencies are so bombarded with these types of letters they cannot respond to all of them in time and they end up removing the information from your credit report.
People often ask me this very question and I give them an answer similar to the one given above. One additional thing I tell them is that if they want to pay for deletion, they’re most likely going to need to pay the balance in full. You can try to get a discount AND a deletion, but in my experience creditors rarely give you both.
I have been working diligently to get my credit score in line. If I only knew some of this information before I payed a good sum of money to the debt collectors. Great information. Thank you
[…] Your best bet is to address the account in a manner that will get the collection record removed. Either a full payment of $88 or a partial payment of anything less to settle the debt would likely settle the matter. However, you should make your payment contingent on the collection agency agreeing in writing to remove any negative reference to the debt on all credit bureau reports. This is often referred to as a “pay for deletion agreement.” […]