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On the other hand, paying an outstanding loan to a debt collection agency can hurt your credit score.Any action on your credit report can negatively impact your credit score - even paying back loans. If you have an outstanding loan that's a year or two old, it's better for your credit report to avoid paying it.

Technically, pay for delete isn't expressly prohibited by the FCRA, but it shouldn't be viewed as a blanket get-out-of-bad-credit-jail-free card. The only items you can force off of your credit report are those that are inaccurate and incomplete, says McClelland.

A pay for delete letter could potentially improve your credit score by removing negative information from your credit report. However, the effect on your score will depend on your particular situation. Also, even if you pay off the debt, creditors may not actually remove negative information from your credit report.

Paying your debts in full is always the best way to go if you have the money.If the collector fails to provide you with this verification, they can't legally collect that debt or report it to the credit bureaus. If they validate the debt, then you should plan your repayment strategy.

The general consensus? A prepaid card used solely to pay the debt collector can be a relatively safe payment method, but be sure to look for a low-fee card and keep a record of your payment.

Pay for delete is when debt collectors remove collections accounts from your report in exchange for payment. It's not advised. Pay for delete is a practice in which debt collectors erase the collections account off your credit report in exchange for payment of the account. The practice isn't totally aboveboard.

A pay-for-delete offer can work, but don't expect the original creditor to cooperate.They can damage your credit score, but it is possible to get them removed and reverse some of the negative effects with a pay-for-delete arrangement.