Pay to Delete Scams
You may already check your credit report regularly and be in the habit of reporting and challenging suspicious activity, but what can you do with a stubborn charge that won’t go away? You know you shouldn’t have to pay it, so you called the creditors in question. They said they completely understand, and it’s no big deal. All you have to do is pay a small fraction of the charge, and they’ll gladly delete it from your report. What’s next?
Many people figure paying a few hundred dollars as a “fee” is better than paying the full amount of the charge. Plus, they save themselves the legal headache and they know they’ll make up for that money by eliminating the compounding interest on the charge itself. It’s just the cost of doing business.
While this approach is understandable, some of us can think of a better way to use a few hundred dollars than lining a scammer’s pocket (i.e., put it towards retirement or our kids’ college fund). Even spending that money on a personal luxury is better than spending it on a scam.
What you need to know
Legitimate credit agencies don’t engage in pay for delete schemes; they usually follow a set process. First, the debt is reported and sent to collection, where it stays on your report for up to seven years (with some exceptions). However, sometimes big credit agencies will sell your debt to smaller agencies for less than what is owed, guaranteeing them at least some income. Unfortunately, the smaller agency wants income, too. They’re often looking for any amount to be paid and they’ll get it any way they can.
This is where pay-to-delete schemes crop up. In order to get something from the transaction, the smaller agency offers to report the whole debt as a mistake if you pay a certain amount. This could be the entire debt, but it’s more likely to be a smaller “fee.” In theory, this helps your credit; however, there’s no guarantee they’ll follow through, as the whole process is legally questionable. Additionally, creditors may suggest pay-to-delete if they created a charge that shouldn’t be there, which can make it difficult to tell that a fraudulent charge existed in the first place.
How to avoid the scam
The best way to defend yourself against scams like these is by knowing when and how a charge can be removed from your credit report. Here are three such scenarios:
You never got the bill (or the bill was for an incorrect amount). This is pretty obvious, and you shouldn’t have to pay a dime. Make sure to challenge suspicious charges. Ask to see evidence of the bill; sometimes the creditor can’t produce it, and they will waive the charge. Always follow up afterward to confirm the charge was removed.
The bill was for medical debt. Some forms of medical debt can be removed from your record (verify this with your accountant or lawyer). A single medical bill can be worth 25 points on your FICO score, so it’s worth the effort! First, check with your insurance company to confirm they paid as much as they were obligated. Second, ask the medical provider for a detailed, itemized bill. Third, request an explanation of benefits (EOB) from your insurance company. At a minimum, show the EOB to your medical provider to make sure they’re billing correctly. Every case is different, so note everything the provider and insurer tell you. It’s often best to seek help from a professional. Remember, a creditor is not a medical provider, so they will have much less freedom to rework old bills, which is why they may be more interested in pay-for-delete.
It’s a small-time creditor. This is where the line between good security and under-the-table scam starts to blur. Small-time creditors want revenue, and they’re more likely to engage in shady practices to secure it. Make sure to get everything you can in writing, and be suspicious. If they’re unscrupulous enough to suggest pay-to-delete, then they probably didn’t do their due diligence. It’s important you do yours! Ask for evidence, and be persistent. Make sure you really owe the money.
It’s important to stay on top of your credit report, but don’t let that number dictate your life. A good credit score isn’t worth falling for a scam! If you do the work on your end, you can get to the bottom of these charges, improve your credit score, and keep your cash in your pocket.