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How To Pay Off Old Bills While Raising Your Credit Score Using The ‘Pay For Delete’ Method

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By Andrea

got-debt-by-idansimpson.jpg When paying off your bills, you have 3 basic options: 

    • You can pay off your bill in full.

    • You can arrange a payment agreement and pay off your bill over time.

    • You can request a reduced payoff amount. 

In an attempt to get past-due customers to pay their bills off quicker, a debt collector will allow the debtor to pay a lesser amount — which may be as low as 50% of the original bill balance.  They generally request a lump sum payment, but they may also allow the bill to be split into 3 or 4 payments. 

Here’s how to pay off your bills and boost your credit score at the same time… there is a little-known way to do this.

How It Works

Debt payoff offers are often sent by the creditor in the form of an offer letter. 

It is very possible for the debtor to initiate the conversation and request a reduced payoff amount. 

If you have been having problems making your monthly payments, or you have not made a payment in a few months to a few years, the creditor may be happy to accept your payoff offer.  The older your debt is, the better chance you will have of paying off the debt at a reduced rate.

Credit Counselors Can Help

Many credit-counseling companies will also offer to help you negotiate reduced payoff amounts for your bills. 

If you are someone who has trouble being forceful, this may be something you want to consider.  However, if the company makes offers to reduce your bills by 70%, you may want to avoid them, as they are offering more than they can deliver. 

According to an article entitled, Debt Reduction Companies – How To Check Them Out:

Nowadays you can find lots of debt reduction companies offering various debt reduction schemes. Compare each company’s services and methods before you select any one. Try to select an accredited debt reduction companies so that you will get professional help to get out of your debts and develop a better financial plan for the future.


What About Your Credit Score?

While negotiating a reduced payoff agreement to pay off your debts can be a very smart move, your credit rating can take a bit of a hit.

Many times, the company will report the debt as "settled" instead of paid in full, and this will cause your credit rating to drop in points.  The reason this is bad for your credit rating is that it is still obvious that you defaulted on your debt and were forced to settle. 

Of course, if you are at a point where you are negotiating your debts, your credit rating may already be in danger.  Plus, it might be better to “choose being debt free over having a high credit score”. 

A better option would be to request a "pay for delete" agreement.  Such an agreement would mean that when you paid the agreed upon amount for the debt, that the credit company would completely delete the account from your credit report as if it never happened. 

Here are sample "pay for delete" letters.