Looks like you gave a lot of information but I'm not getting. Firstly, what is pay for delete? And what are you saying? That you should pay the collectors or that you shouldn't? And I didn't get the 1-in-100 part either. Completely lost!
Pay for delete is a reference to the credit reporting agencies. Basically, you pay the debt collector only if they agree to remove the negative mark from your credit report. Without it you would still have the delinquency showing up on your credit report until it became old enough to drop off (I believe this takes seven years).
As others have stated, pay for delete is when you negotiate a settlement with a debt buyer/collector, where you request that they remove the negative marks from your credit report upon payment.
Historically, this was hard to accomplish. By 1 in a 100, I mean most frontline agents you'd speak with or have written correspondence would outright say it was impossible.
Now, many of the large companies that facilitate these services offer it as an incentive for paying your debt in full, or getting a settlement.
The lifecycle of a bad debt normally follows this pattern:
- you default with original creditor, e.g. stop making minimum payments in your credit card for 90 days
- you get placed in internal collections. Your card is shut off, and they call 3-5 times a day to get you to pay
- if you fail to make arrangements, at around 180 days, they will "charge off" your account, writing it off as unrecoverable debt. This is the second negative mark you will have, the first being your late payments
- if you continue to be in default, they will sell the debt to a third party collection agency or debt buyer. Typically these are bought at thousands of accounts at a time, for pennies on the dollar. Let's say you owe $1,200, they likely paid far less than $100 to own the rights for that debt. Because of the contract that you agreed to when opening your account, and the statute of limitations in your state, they can legally pursue the full amount even though they paid less. If you do not pay this in the first 30 days of receiving notification of the intent to collect the debt (required by law), they will add a negative trade line to your credit report, as a collection account
- for the next few years, they will call you, write you letters, occasionally offer payment plans or the ability to pay it off for less than the full amount. During this time, your credit continues to be damaged. Eventually, one of two things will happen: the statute of limitations, or the timeframe in which they can sue you to force payment, will expire. Either you are worth the contracted paralegal time or not.
Ideally by this point, you've resolved the financial situation that resulted in in the default in the first place. Contrary to common belief, paying a collection account does not improve your credit score in nearly all cases.
This is where the pay for delete comes in, you would attempt to get the debt collector to agree to remove the negative reporting from your credit report upon settlement -- or as is the case with most of the big players in the last couple years, they offer it by default, confirmed by their public FAQ pages and such.
Whether you should pay a collector or not is up to your financial situation, your understanding of your rights, and ultimately your unique situation.
Some will argue that you are morally obligated to pay the debt that you created for yourself, and agreed to by nature of a card member agreement.
Others will say that medical bills in the US are unreasonably high cost, that this industry is one of the factors in keeping the poor poor, or that once it is sold to a third party agency for pennies on the dollar, you shouldn't pay the full amount or be on the hook for it.
The idea is, these collectors informed Credit bureaus of the negative tradelines. Now, they come after you to see what they can get. If you pay them back, there is no guarantee that they will inform the credit bureaus you have paid; essentially, leaving that damage on your report until 7 years from their time of reporting elapses.
A Pay-For-Delete seems to suggest that you should double check terms you are being offered for an explicit contract clause that binds them to report the resolution of the debt to credit bureaus.
The credit bureau will do one of three things. They will show it as paid in full, settled(for a lesser amount than the full balance), or they will remove it(pay for delete). Although the credit bureau will state openly that deletion is not a possibility unless the account is not yours.
If the debt is disputed as ”not mine” the collection agency will be contacted to ask for verification of the debt. If the agency says no go ahead and delete it, well you got your “pay for delete.”
Keep in mind paying a collection off may not increase you score and in some cases may lower it. Getting it deleted is ideal, but the collection agencies should not be doing this(its in the agreement the collection agency makes with the credit bureau).
