Sam Makad
Sam Makad is a business consultant. He helps small & medium enterprises to grow their businesses and overall ROI. You can follow Sam on Twitter, Facebook, and Linkedin.
Planning to start your own credit repair business? Then read this comprehensive step by step guide to start a credit repair business from scratch.
Credit card repair is a profitable industry, as 1 in 3 Americans has incorrect credit reports. It is also a lucrative business, as who would not want to improve their financial future?
Getting started is easy — entrepreneurs do not have to find gigantic capital or rent an office. You might even work from home with a computer and phone. This is an excellent option if you want to become your boss!
In this niche, the monthly profit for small companies generally ranges between $4,000 and $10,000. At the initial stage, you will need to adjust pricing, polish your website, stay updated with The Credit Repair Organizations Act and find the optimal sales strategy. Check this credit repair comparison and follow our guide to establish your business correctly.
The Appeal of Credit Repair Services
The credit reporting system in the United States is far from perfect. On average, 34% of consumers have one or more mistakes on their reports, which translates into unjustified credit scores. In addition, a lower rating makes borrowing difficult or impossible because lenders charge higher interest or reject applications.
In addition, this metric is considered by other institutions — insurance companies, landlords, and recruiters. Therefore, a low score has far-reaching implications. They also last, as most negative information stays on the records for seven years.
The industry is based on the stipulations of The Fair Credit Reporting Act. Every agency — Equifax, Experian, and TransUnion — has a legal obligation to provide only very viable data. In reality, this does not always happen.
While the law gives everyone the right to open disputes with the bureaus, many consumers delegate this job to professionals to save time and effort. This can be lucrative — for example, the experts of Lexington Law charge as much as $129.95 per month! Here is how to get started.
Step 1. Learn About Surety Bonds
First, find out about the surety bond your company must get to comply with the local legislation. Registration is usually straightforward, and pricing varies. However, a bond must be filed as the future is uncertain.
If your restoration attempts cause damage to a client's score, they will get compensation. Bonds are designed to protect consumers from substandard services. Unfortunately, there are no guarantees in this industry, so you never know what can happen when you fix a credit report.
Step 2. Register Your Credit Repair Business
Without registration, you cannot open a business bank account, and your company has no credibility. Remember that credit repair involves high risk, as it includes a lot of variables and uncertainties. Consult with a tax professional or attorney to pick the suitable model (a sole proprietor, LLC, or DBA).
Step 3. Find Banks That Approve Credit Repair
Many banks are reluctant to open accounts for these businesses. The risky nature of the niche explains their aversion. However, a few banking and financial institutions are considered credit-repair-friendly:
- Wells Fargo
- Schools First Credit Union
- Bank Of America
- BBVA
- Regions Bank
- Navy Federal Credit Union
Step 4. Get Training
Credit repair professionals do not have to earn a degree in finance or economics, but certification is essential for your status. Fortunately, there are plenty of online courses to get the basic training fast. For example, you can find plenty of such systems on Udemy. Next, get certified by a well-known educational provider, The National Association of Certified Credit Counselors or The Credit Consultants Association. Begin by learning:
- how to dispute letters work
- how to read and interpret the contents of credit reports
- how to save money for clients
- how different types of loans work
- how three major bureaus work and compare, and
- how to get a banking and merchant account.
Some of the best companies that help build business credit not only provide exceptional services but also offer comprehensive training. They empower you with the knowledge to create credit reports and scores from scratch while equipping you with the skills to effectively handle disputes with creditors. Additionally, these companies offer invaluable coaching and support services, where you can freely seek advice and get answers to your questions as needed.
Step 5. Choose Your Pricing Model
As repair does not have a fixed duration, companies use a variety of pricing models. The most common system is subscription-based. Flat fees are also popular, as consumers get a fixed price regardless of how long their case will take. Here are the most popular options:
- Subscription-based
- Flat fee
- Pay per deletion
- Guidance only
In the first case, the client is charged regularly based on the billing cycle — for example, every 35 days. In addition, the company may initially charge a so-called first work fee, also known as the review fee or the setup fee. As The Credit Repair Organizations Act prohibits advanced payments, providers have to complete some work initially — usually, they obtain and assess the client's reports.
Shady businesses keep charging fees for months without doing any work. This causes a lot of bad reputation, so many clients are wary of subscriptions. A flat fee is a great alternative. You may also charge a modest fee for every deletion — for example, $25. Commonly, it is combined with a first work fee.
Finally, there is a guided repair. According to The Fair Credit Reporting Act, every consumer has the right to open disputes, so some clients prefer to pay for support. They usually get access to training content online and assistance from the team, but the company does not work on their behalf. On average, this costs between $200 and $400 (flat fee).
Step 6. Find the Right Software
The best software for credit repair allows you to launch and scale your business, get more sales online, delete negative information faster than competitors, and streamline the workflow. It includes additional features like flexible appointment scheduling and a course platform that lets you provide freebies like DIY guides.
Most products cost between $179 and $599 per month. There are also some free alternatives. However, you will likely end up paying for the professional version anyway.
Step 7. Start Advertising!
The internet provides many ways to spread the word about your company. You may establish a presence on different social media platforms and buy paid ads. Here are a few tips:
- Create a Website
Despite the pervasiveness of social media, a website is still indispensable. It is vital for credibility. You do not have to pay for the fancy design, as there are plenty of WordPress templates. A company may take off even with a one-page site, provided that it is pleasing to the eye, well-structured, and offers valuable information. Showcases, testimonials of feedback from real customers, and free educational resources.
- Instagram Marketing
Instagram has over 1 billion followers, and it will expose your brands to a massive audience if you set up your marketing campaign correctly. Post valuable and original content to engage potential clients. Use different tools at your disposal — posts, stories, and Reels. This platform is extremely popular with millennials who are prime for credit repair.
Promote your most popular posts as paid ads so they are shown to specific categories of users who do not follow you. Share testimonials and past results, and offer free training. To retain the audience's attention, you need one post and 1-3 stories daily.
- Social Media Ads
Ads on Facebook and Instagram will help you build credibility and get more sign-ups. In addition, modern systems allow you to automate the process and manage multiple campaigns from one place.
- Find Affiliates
Getting affiliates is one of the best ways to grow your business. They will provide you with warm leads. Besides, you will not have to care about SEO or ads. Instead, you may get tips via messages on Instagram and Facebook.
Which States Can You Provide These Services in?
The Credit Repair Organizations Act (CROA) is a federal law, and credit repair is legal in all 50 states. However, credit restoration services are regarded as high-risk businesses, so you must ensure your operations comply with local regulations.
The CROA contains many restrictions. For example, you may not charge an advance fee, a written contract is mandatory, and cancellation must be possible at any time. There are also local differences that must be researched. Nevertheless, the potential for expansion is astonishing. For example, Ovation Credit Services works in all states except Idaho, Minnesota, Ohio, and South Carolina.
How to Outsource Your Business
One of the ways to accelerate growth is to outsource the business. This may be done by hiring remote sales reps and dispute processors. Let them handle the bulk of the workload while you are involved in day-to-day operations. This is an excellent opportunity to speed up the launch. In addition, you will not have to go through the headache of local employment, as you will put employees in place in a hassle-free way.
Extra Tip: Automate Your Business
There are many ways to streamline your business processes and accelerate sales. For example, the Credit Repair Cloud is a versatile package with a website, flyer templates, API integrations, templates for dispute letters, educational resources, and more. Sales funnels, email marketing, and social media automation will let you save time to focus on business growth. You can adjust your ads for different social media platforms via the Aitarget Automation Tool and monitor the insights from one place.
The Bottom Line
Credit repair is an attractive niche for entrepreneurs, as these services are in high demand, and getting started does not require much capital. However, consistent success is only possible if your company complies with all the legal requirements and provides high-quality services that help people rectify their scores. Therefore, research all the laws and regulations thoroughly and contact a tax expert to choose a suitable registration form.
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