Lugging around a bad credit score through life can feel like an unbearable weight that is impossible to put down…
Many people have no idea where to even start when it comes to repairing their credit!
Which is where you come in!
If you’ve ever wondered how to start a credit repair business, then this is the article for you.
Starting a credit repair business from home and be a great way to make a living, while also helping people escape crippling debt and poor credit scores.
I'm Ippei, a master of all things online business, passive income, and local lead generation...
And before you get started, you need to know the startup costs involved in this business, as well as the pros and cons of the credit repair industry.
Which is why I’ve done the hard work and created this comprehensive startup guide for opening a credit repair business!
So let’s dive right in.
How to Start a Credit Repair Business in 2021
Want to Start a Credit Repair Business? Here's What You Should Know:
If you want to start a credit repair business, you will need to have a specific set of skills. Specifically, to get started, you will need to familiarize yourself with the laws surrounding credit repair, learn how to draft dispute letters, and work to automate your client communication.
Start Up Costs
While this list is not a comprehensive compilation of everything you need to start a credit repair business, it provides a snapshot of what you need to add into your business plan.
Annual Revenue of Established Credit Repair Business
According to https://www.firstcardpayments.com/credit-repair-business-profitable/, the average annual revenue of this kind of business is: $40,000-$135,000
Profit Margins of Established Credit Repair Business
The average Profit margin of this kind of business is: 30%
9 Step Quick Start Checklist:
1. Do Your Research
Before you can start a credit repair business, you have to do your research.
There are very real laws and regulations that govern credit repair, and you need to be familiar with all of them before you start messing with someone’s credit score.
If you’re unsure of where to start, I highly recommend diving into Youtube.
There are a wealth of videos that dive deep into every stage of starting a credit repair business.
But if you are more of a text book learner, then check out this book: Credit Repair for Dummies.
It will get you headed in the right direction.
You will also need to understand the in’s and out’s of what credit repair businesses actually do for their clients.
Primarily, credit repair services are focused on disrupting inaccurate, outdated, or negative information that is associated with a client’s credit report.
As a some who runs a credit repair business, you’ll be responsible for managing the entire process, including:
One of the most important aspects of your job will be learning the laws surrounding credit repair like the back of your hand.
These laws not only insure that you are operating your business legally…
But they also provide protection for your clients, and strategic loopholes for obtaining credit deletions.
The are three primary laws that you will need to become extremely familiar with:
All three of these acts are governed at both a federal and state level, and typically, the state level will have stricter requirements than those listed at the federal level.
You will need to invest time into learning the application of these acts at both a federal level, and at your local state level.
Let’s break down these key terms:
Important Laws That Apply to Credit Repair Businesses:
This is just a basic level understanding of these important laws.
Which is why doing your research before you decide to launch a credit repair business from home is so crucial.
Ideally, your first client will actually be yourself.
If you can learn to repair your own credit, then you can branch out to friends and family.
Someone’s credit score is not something to handle lightly, so ensuring that you have sufficient experience and knowledge first is a must.
2. Get Legal
Once you’ve done your research, you can jump into the setting up of your business from a legal standpoint.
The very first step is to choose a name for your credit repair company, and register that business name with your local secretary of state.
Typically, this can be done online, but the most important part is making sure that your business name is still available.
If there is another business out there already operating under your chosen business name…
They might have that name trademarked, and the last thing your new business needs is to receive a cease and desist letter from them a couple months down the road!
It’s best to choose a new name entirely.
When registering your business, you will want to register your business under the “Credit Services Organization” category within the secretary of state’s database.
From here, you can form an LLC.
Although you could stick to the automatic categorization of being set up as a Sole Proprietorship, it’s best to separate your personal liabilities from your business as soon as possible.
An Limited Liability Corporation protects you as the business owner for being personable liable for consequences related to your business.
And finally, you will want to register for your EIN tax identification number.
Your business’s EIN number will be necessary for opening a bank account, hiring employees, and filing your taxes.
But it’s free to apply, and can easily be done online from the IRS website.
On top of these basic steps to legally establishing a business, you will need to investigate the local laws related to credit repair surety bonds in your state.
Not all states require a credit repair business to obtain a credit services organization bond, but you need to know if yours does!
Here is a link that will direct you to a list of states that do require a surety bond for credit repair business:
Link to Credit Services Organization Bond List: https://bondsexpress.com/credit-services-organization-bond/
A credit repair surety bond exists to protect your client from any damage or negative results due to the actions of your credit repair business.
They typically cost around $200-$300. Fortunately, obtaining a credit repair bond is relatively simple…
And after your payment and application, you can often receive your approval within 24 hours!
Keep in mind that the application will be based on your own personal credit score, taxes, assets, and anything else that has been reported in your public records.
Fortunately, beyond the local regulations for surety bonds, no credit repair certifications required for this business from a legal standpoint.
They do exist, but unfortunately they aren’t always helpful in starting a successful credit repair business.
This is a determination you will have to make for yourself, but all the information you need to start this business is available to you without a certificate.
You just have to be willing to put in the time and effort to research, educate yourself, and establish your business.
3. Business Banking
If you are going to be running your own business, of any kind…
Then you need to open a business bank account!
Mixing personal finances with business finances is a disaster waiting to happen…
And a headache that you don’t want to deal with come tax time.
Unfortunately, obtaining a business bank account as a credit repair business can be extremely difficult.
Many banks avoid working with credit repair businesses due to the high risk nature of the industry.
Due to the difficulty of obtaining a business bank account as a credit repair business, avoid including the word “credit” in your business name.
Instead, opt for including terms like, “financial services” or “financial consulting”.
Because credit repair businesses are considered high risk, many banks will not want to work with you.
Minimizing the difficulty of getting a bank to work with you is important.
Don’t be discouraged, though!
There are plenty of banks out there that will work with you…
You just need to stay diligent to find the right one.
4. Disputing
Hands down, one of the most important responsibilities within a credit repair business is that of filing disputes.
The entire success of your business rests on your ability to do this well!
Once you have gone through on-boarding a new client and going through the initial consultation…
You will need to create dispute letters and send them out to various credit bureaus and furnishers on their behalf.
But before you can create effective dispute letters, you will first need to understand the various strategies involved in repairing and boosting someone’s credit score.
Strategies for Credit Repair:
Credit Freeze:
Removing Inaccurate Addresses:
Disputing Collections and Charge Off Accounts:
Disputing Inquiries:
Ultimately, all of these strategies are really just laying the groundwork for your business.
As you become more skilled and familiar with the laws and regulations involved in credit repair, you will learn how to dispute a wide variety of different things on behalf of your clients.
These skills come through time and experience, but they will make your services even more valuable!
The goal is to become adept at working through a monthly dispute cycle for each client…
So that you will have a 30 day system of filing disputes, checking back to review the responses from these disputes, and generating new disputes as is applicable.
5. Credit Repair Software
If the last section of this article seemed intimidating to you…
Then I have some good news.
There are amazing credit repair softwares available that will help you with everything from client communication to creating professional dispute letters!
Many of these softwares even include templates for a wide variety of different disputes.
You will be able to customize these templates according to your business and brand to create something that works for you and your client.
These softwares will also assist you in sending out dispute letters and keeping up with your various client’s credit reports.
Some great options for credit repair software are:
Although this software will be a significant investment for your business, it will be completely worth it.
The automation capabilities of these programs will uplevel your business and allow you to take on more clients than if you were stuck doing everything on your own.
And being able to take on more clients equals more money in your pocket at the end of the day!
Typically, a credit repair software will cost you about $100 per month.
One of the greatest benefits is that instead of being responsible for printing, labeling, and sending dispute letters via USPS certified mail…
Software like Dispute Bee handles all of this for you automatically!
Imagine how much time this will save you in the long run.
6. Organization and Automation
Speaking of automating your to-do list…
There are a wide variety of ways that you can streamline your business through automation.
For Example:
You can set up an automated call service that is linked to your online appointment booking. Once someone books an appointment with you, they will receive an automated message thanking them, and giving them further instructions for the next steps.
The more steps you can take to automate your business, the better.
Especially when you are first starting out and working on your own.
When you are first going into business for yourself, hiring an assistant or employees probably won’t be practical.
Especially if you are wanting to start your credit repair business from home!
Even small things like having these automated messages set up will be a huge help if you have multiple people booking appointments with you at the same time…
Because it will give you the ability to serve your clients without being spread too thin making personal confirmation calls to every one of your new clients.
(Look into applications like Call Loop for automated call services.)
In addition to automating calls and sending disputes, you can also automate portions of your marketing.
This can be done through creating an automated social media posting schedule.
Once you create the content, you can use an app to schedule out your posts so that you don’t have to think about them again.
Or you can even partially automate your email by creating pre-built templates for your client communication.
This will relieve you from having to draft a specific email every time you hear from a new client.
You can simply personalize and adjust your pre-built email template and send it off…
Without the hassle of staring at a blank screen thinking about how to reply!
7. Marketing and Website
The due diligence aspect of starting your own credit repair business is by far one of the hardest parts…
Unless you enter into the industry with an expansive knowledge of credit repair beforehand.
But once you have adequately tackled those initial phases of starting your business, it will be time to turn your attention towards your marketing strategies.
Firstly, even though your website will likely not be your primary source of attracting new clients…
It is a mandatory portion of establishing credibility, as well as having a professional and organized platform to direct potential new clients to.
One thing to consider when building your website is your URL.
Your website’s URL will often be the name of your business, but in some cases, you may have to adjust things if that URL is already in use.
The keys to a good URL is finding a name that is:
From there, you can build out the presentation of your site using a template based website builder.
There are a variety of different website builders available now, and they are great for small businesses that are just getting started and cannot afford a professional web designer yet!
Some of my favorites are:
Don’t overthink the creation of your site!
The important thing is that it is a simple yet effective platform to direct new clients to for onboarding and booking consultations.
If you haven’t already guessed it, the next best way to market your small business is through social media!
Although the more typical platforms like Facebook and Instagram might be your initial go-to’s for setting up business accounts on social media…
Don’t forget about up and coming players in the social media realm!
By leveraging the unique audience of platforms like TikTok, your business will be able to capitalize on a market that no one else may be reaching in your industry!
Trust me, TikTok isn’t just for the Gen-Z and the cool kids anymore…
In addition to posting consistent content across your business social media accounts, consider setting up private Facebook groups as a perk for your clients.
Having a support group of like-minded people who are also trying to build their credit and get their finances in order could be a huge bonus for your clients.
If your budget is a little larger, you can also look into paid ads through Google and Facebook to extend your audience even further.
And if you're still struggling to attract the amount of business that you need...
Take a look at our course on local lead generation for small businesses!
8. Billing and Invoicing and Payments
Alright!
So you have your first client, and now you need to invoice them for their initial payment…
The easiest solution would be to have them pay you through Cashapp or Paypal, right?
WRONG.
There are not enough red flags for me to wave right now…
But please don’t do this.
You should not use companies like Square, Cashapp, or Paypal to receive payments from clients.
These companies have certain laws and stipulations within their fine print that prohibit them from being legally used by credit repair companies.
And don’t think that you can skate by without being noticed!
That will only result in a massive headache if your account gets shut down with pending transactions still processing because they discovered the type of business you’re running.
You might have thousands of dollars in pending funds trapped within their system that you will then have to find a way to get from them.
Or potentially even lose out on that money completely.
The risk just isn’t worth it for the initial convenience that these companies offer.
This is why you will want to invest in an official merchant account.
Once again, due to the high risk reputation of the credit repair business…
Many merchant accounts will turn you away.
You will need to look for a payment gateway that works with higher risk businesses.
Pro Tip:
Don’t forget that there are laws that prohibit you for billing clients as a credit repair service before any services have been rendered. To work around this stipulation (that is in place for the protection of your client!) your initial invoice should be for something like “processing paperwork” or “filing contracts”.
And lastly…
Don’t give your services away!
Take the time to add up your monthly expenses and account for your time.
Your working hours are valuable, and although you don’t want to charge an arm and a leg for credit repair services (since your clients are potentially already in a financial bind)...
You should be charging what you are worth.
And at the least compensating yourself for your business expenses and hours.
9. Set Clear Expectations
Here’s the deal.
When people come to you for credit repair services…
They may or may not have any idea what that entails.
Which is why setting clear expectations for you clients in the beginning is so vital.
Credit repair isn’t cut and dry.
It takes time, and many people think their credit can be completely fixed within a matter of days or months or a few simple dispute letters.
Getting bankruptcy removed might take only a matter of a few months for one person…
And up to a year for someone else.
Each situation is completely unique, and there are a lot of different variables that will affect the speed of their overall credit repair.
Your clients need to know that they are embarking on a process that will not necessarily have a definitive timeline.
The sooner that you communicate these things, the better.
The last thing you want is to have a dissatisfied client leaving you a bad review, simply because their unrealistic expectations were left unmet!
Clear communication is the key to any happy, healthy relationship...
And this is true of both personal life and business relationships!
Pros and Cons
of starting a credit repair business
Pros
For many aspiring entrepreneurs, one of the greatest draws to launching a business is the freedom to set your own schedule. There’s no boss to dictate your day, or look over your shoulder… You are in control of your time. This can be both freeing, and stressful. But for most small business owners, it is one of the most gratifying aspects of being self employed.
Because of the massive debt cycle and normalization of debt within modern society… A credit repair business is basically essential. People aren’t taught how to take care of their credit, how to build it, or how to repair it once it’s been abused. So your services will be valuable for the foreseeable future.
One huge advantage to the credit repair business model is that you can run this business completely from the comfort of your own home. Most of your clients will be acquired online, and likely won’t even live in your area. So having a formal office isn’t even necessary!
If you are passionate about helping others, this is a great business to get into. Bad credit can seem like an insurmountable burden, but you will be able to walk people through this struggle and see them to the other side. And there is something very satisfactory about helping someone transform their life.
Cons
Because your clients are typically already struggling with money… There is only so much that someone will reasonably pay for credit repair services. Keep this in mind, and realize that by the time you pay for the right software, invest in marketing, and get your business set up… Your profit margins may be pretty slim.
If you have any visions of earning steady passive income from your credit repair business… I encourage you to lay those aside. Your income as a credit repair company will be directly linked to your hours. While owning your own credit repair business can eventually lead to consistent passive income, that is a long way down the road.
You are handling something almost as valuable as money itself… Someone’s credit score. In light of the seriousness of this job, there are strict laws and regulations surrounding the credit repair industry. Be prepared to stay in compliance with these laws from day one.
While almost anyone can learn the skills of credit repair… There is a learning curve to this business. Take your time, and learn to do things right. And don’t expect to go from zero to one hundred overnight. It will take time to learn the ropes before you can start charging for your services.
A Credit Repair Business Can Work, but Lead Gen is Better, Here's Why:
Let’s cut straight the point here…
Starting a credit repair business isn’t going to be easy!
Although the startup costs are low, and there is the potential to run your business from home…
The benefits of this business model really stop there.
If you are truly passionate about helping people repair their credit…
Then by all means, go for it!
But if you are primarily pursuing the idea of working for yourself, creating a living online, and having a job you can do from anywhere....
I have a much better solution for you.
And I can say that confidently because this solution changed my life when I was sick and tired of making 2K per month at my traditional job!
My solution is a little something called local lead generation…
And within only five years I have a successful business that allows me to work from anywhere, generate passive income online, and make over 50K per month!
If that sounds like it’s more your speed…
Click here to learn more about how we can help you get started with local lead generation today!
