Sure, it's a pay for delete. Where you offer to pay them the amount owed in exchange for them deleting the account from your reports. They do not have to agree to this, but if you check out the rebuilding forums you will read all sorts of success stories of membes who have been successful in getting derogatory info removed by using pfd or GW (goodwill) letters. Goodwill letters are used to ask for deletion of paid derog accounts or removal of late payments. May want to check out the rebuilding forum for some helpful letters.
It's not illegal. But what they are referring to is that what they report has to be fair and accurate by law. But there is no law that says they have to report. I'd try and write a letter instead of talking to someone on the phone.
I'd start by taking a look at these threads:
http://ficoforums.myfico.com/t5/Rebuilding-Your-Credit/What-Steps-Do-I-Take-Do-I-DV-PFD/td-p/337142
and
http://ficoforums.myfico.com/t5/General-Credit-Topics/Frequently-Requested-Threads/m-p/10675
Both have great info! And you're very welcome. This site is full of wonderful information from people that have been there or are still stuck there. We all help each other!
If you're current goals are to get a mortgage and a better score, you probably don't need any other cards. You have 3 and that's good. Just keep paying them on time, especially if you want a mortgage in the next 12 months (lenders want clean positive credit for at least 12 months these days). Garden the cards you have now. And like Wolf said, keeping the Crap1 is better than the FP. If you junk the Cap1 you will lost thae $1k in available credit and your utilization will be very sensitive to that loss. FP won't grow with you either, whereas with Cap1 there is some room for growth.
If you're aren't opted out and are not receiving any pre-approvals that probably means you aren't matched with any lenders right now. If you are opted out, you won't get any pre-approvals at all.
