Can a Collection Agency Legally Delete Paid Accounts?

Although the major credit reporting bureaus don't like to widely publicize this fact, a collection agency can legally delete a paid account, called a "pay for deletion." However, a pay for deletion probably does not help your credit much. In some cases, attempting a pay for deletion is worse than just paying the debt.

Identification

A collection agency can delete an account. The debt collector can write the credit bureaus and state that the account was listed in error. Most collection agencies usually only agree to this arrangement when you pay the debt in full. Offering to pay a portion of the balance can still garner a "pay for deletion," but your chances of success go down as you pay less than the entire balance.

Effectiveness

Even if you successfully negotiate a pay for deletion, it may not make a difference to your credit rating. Deletion of the collection account does not remove record of the original account. Missed payments and notation of a charge-off on the original account still negatively affect your credit rating. Only deletion of the account from the original creditor eliminates it from your record.

Danger

Demanding a deletion in return for payment can put you in a worse position that paying the account as requested. For example, if you ask for a deletion before negotiating a settlement, the debt collector may deduce that your credit rating is a high priority to you or that you have the money to pay the entire debt. It may then refuse to settle the debt and sue you or use the request for deletion as leverage for a higher settlement or payment in full.

Tip

If you negotiate any kind of deal with a collection agency, get it in writing and have someone from the company sign it, according to Brigitte Yuille of Bankrate.com. Verbal agreements are a legitimate contract, but very hard to prove. Ideally, you should offer payment to the original creditor, but larger banks and companies probably won't agree to a pay for deletion scenario because of administrative red tape required to approve such an agreement.