Starting a Credit Repair Business

An app showing a credit score.

How to Starting a Credit Repair Business

In today’s economy, many people are struggling with financial problems. As a credit counselor, you connect the people who owe money on their accounts and creditors.

A normal day may start with new client meetings. Then, after, you could be working out a budget and organizing debts. Finally, you may spend time talking and negotiating with creditors to reduce interest rates or consolidate debts.

The purpose of this post is to describe the steps to starting a credit repair business.

Additionally, you will find links to articles that can assist you during the start-up process. You may want to bookmark this page since it has a lot of information and links to other articles.

Consider each of the steps carefully and take your time. Planning and thinking ahead will help you avoid errors and streamline the process.

1. Research the Industry

Before you start your business, you must conduct research. Only then can you make informed decisions. This keeps you from making a mistake. In addition, you’ll feel better about starting your credit repair business if you do more research.

I have written a separate post outlining how to get inside information for the business you’re considering; see An Inside Look Into the Business You Want To Start.

2. Choosing a Business Location

The location of your credit repair business is an important decision. If you locate your credit repair service in an area with no demand for your products and services, then what’s the use of opening in that area?

In contrast, if your business is located in an area saturated with credit repair businesses, you may have difficulty competing.

If you plan to set up a home-based business, you’ll need to decide whether you’ll open in a commercial space or not. Even though home-based businesses are not taken seriously, they are cost-effective. Another idea is to start your business from home, and once your business gains popularity, you can always move to a commercial location.

For more, see Choosing the best location for your business.

3. Choose a Business Name

You need to choose a catchy and memorable name for your credit repair business. The name you choose today is the name you’ll keep for as long as you are in this business.

Many online resources are available to help you develop an original name for your credit repair business. They include lists of ideas or generators for names.

Create a list of names that make sense to you and set it aside for a few days. When you return to it, you’ll see it in a new light. First, check if the top five names on your list are available for registration, along with the matching domain name.

Having created a list of the top five business names, read them aloud to see how they sound and how easy they are to pronounce. After that, print them out and see how they appear.

Afterward, you should get some feedback to learn what other people think of the names. Ultimately, the final candidate should be registered along with the matching domain name.

For more on credit repair business name ideas, see the following:

Credit Repair Business Name Ideas; see Google’s latest search results

How To Register a Business Name

How To Choose a Business Name

Registering a Domain Name For Your Business

4. Legalizing Your Business

Your business needs to be legalized now. Almost all states and provinces have similar regulations for registering a business, but each has its own differences, so check the regulations in your area.

a.) Decide on a Legal Structure

You can register your credit repair business using a variety of structures. Sole proprietorships are popular because they’re easy to set up and cost the least. However, it is also the least protective of your personal assets. In other words, if there’s a problem with the business, for example, if you have to file for bankruptcy, or if the business is being sued, then your personal assets are at risk.

You can always start as a sole proprietorship if you’re starting at home. Then, when your business gains popularity, you can switch it to another structure such as an LLC or a corporation to protect your personal assets.

I prefer to hire a lawyer or a business formation service because I want everything to be legal, complete, and set up correctly. For more, see how to register your business.

b.) Obtaining a Tax ID for a credit repair business

You may need a tax ID at this stage of your business, depending on the size of your company and whether you have employees.

Using a professional will also handle the tax ID during the registration process. For more see, how to get a business tax ID

c.) Credit Repair Business’ Permits and Regulations

You may be required to obtain a surety bond. If a bond is required, a copy must be filed with the Corporate Commission in your state. You will also have to closely follow the Credit Repair Organization Act’s regulations.

In addition to state and provincial registration, you’ll also want to contact your local municipality or City Hall to inquire about their regulations for the local area. You’ll also want to look into zoning restrictions for a credit repair business. Visit our licensing and permits page for more information.

5. Create a Corporate Identity Package

Branding your business begins with your corporate identity. Your logo and business cards leave a lasting impression on your customers, regardless of whether they are positive or negative.

A corporate ID consists of the following components:

  • Logo
  • Business card
  • Letterhead
  • Envelopes
  • Business checks
  • Business sign
  • Website
  • Promotional materials
  • Etc.

If you don’t want to spend a lot on a corporate ID, Start with your logo, business cards, and a business sign when you start out. Then, once your business starts to gain traction, you can complete the other items as required.

For More See:

How to design a business logo – make it good it might last years

How to design business cards that people will pay attention to

Business signs – have a look at these ideas.

A complete introduction to corporate identity packages

6. Estimating Start-up Cost

How you set up your credit repair business will determine your start-up costs. However, an accurate estimate of start-up costs is impossible without a definite and clear plan.

For example, starting a home-based credit repair business differs from setting up in a commercial location. Buying the best of the best will cost more money.

After you have a plan, you can start getting quotes and estimating your start-up costs. For more, see Estimating start-up costs: are you missing anything?

7. Writing a Credit Repair Business Plan

There are options for creating a business plan which include:

  • Filling in the blanks with a template.
  • Use software that guides you through the process.
  • Outsourcing the creation of your business plan.

Despite the above information helping you create your plan, you are the one who had to provide the information.

Your business plan should be reviewed periodically to ensure you’re on track or make adjustments to your business plan or strategy. For more see, How to write a business plan

8. Business Banking Setup

To keep your finances in order and separate from your personal finances, you’ll need to select a bank. Alternatively, you can use the bank you already have or find a bank that will give you a business loan.

The focus is not just on the bank but more on the banker. A competent banker that you develop a relationship with can assist you with many parts of managing and running your credit repair business, including short-term loans and helping you with your finances, among other things.

For more see, How to choose a business bank.

Acquiring a Merchant Account

Your credit repair business will require a merchant account. Credit cards and debit cards are the most common payment methods. You will need a merchant account to process those payments and deposit them in your account.

Your banker can assist you with your merchant account’s application and approval process. See how to open a merchant account for more information.

9. Get A Loan

If you require funding for your credit repair business, then it’s time to make copies of your business plan and start making appointments with lenders so you can apply for a business loan.

You need to be aware that banks view new businesses as high-risk. That’s because many businesses fail in their first few years of operation. In addition, an established business is more likely to be funded by a bank than a start-up. As a result, all the requirements must be met to approve a business loan.

Consider addressing the problems before reapplying or applying to another lender instead of getting disappointed if your loan is declined.

If your loan is repeatedly declined, you may want to consider finding investors or a partner. To secure a loan, you can also search for a lender who has guarantees from the government, such as an SBA lender.

In addition, if you are declined multiple times, take a breath and see if there’s something you’ve missed. Be cautious if the lender thinks you will fail. Also, take a look at our post on, Getting a small business loan.

10. Software Setup

Spend some time researching software that can assist you with your credit repair business. For example, a software package may help with scheduling, employee management, accounting, etc. You may be able to find one package that does everything you need or a combination of packages.

If you are interested in a particular software package, it would be good to read reviews about it. Additionally, many companies offer free demos of their software. Finally, check out Google’s latest search results for software packages related to a credit repair business.

11. Insurance

Before engaging in any credit repair activity, you must have the right insurance coverage. In addition, your staff, customers, office should be adequately covered.

Having a competent insurance broker by your side can make sure you have enough coverage in case of any unfortunate event.

Further, you may want to consider interruption insurance which will cover you if, for example, a fire or flood shuts down your business until repairs can be made. It will keep some of your average revenue flowing until you are back in business. For more, see our page about business insurance.

12. Office Setup

Now is the time to set up your office. This is something you should do as soon as possible. First, outfit your office so that it’s fully functional and equipped. It’s also important to make sure it’s organized and comfortable because you’ll be doing most of your work there. So it makes sense to set it up properly from the beginning.

Make sure you choose a desk and chair that are comfortable and to your liking. If you take care of a desk, it usually lasts 20 to 30 years. Once it’s in place, you don’t have to worry about replacing it. So get the best desk you can afford and remember you may have it for a long time.

Your office should also be decorated the way you like it because you’ll likely be spending a lot of time there.

For more see, Here are considerations for the setup of your office.

13. Create an External Support Team of Advisors

You may want to consider creating an external support team. These are people who are not on your payroll. Instead, they are paid hourly, by the job, or through a retainer contract.

Your team may consist of the following members:

  • A lawyer
  • A business consultant
  • A marketing consultant
  • A graphic designer
  • An IT consultant
  • A web designer
  • An accountant
  • A business strategist
  • Etc.

When you create an external support team, you want to treat them as extensions of your business. You will need individual members as needed, but you should keep in touch with them with an occasional email or phone call. They will then be ready to help when you contact them. For more see, Build a team of professional advisors for your business.

14. Hiring Employees

If you’re just starting out, you may plan to do everything yourself, and that’s a great idea, especially if it doesn’t hurt customer service. However, if your business grows and becomes popular, you may need to hire staff to help you run the business or manage it.

Some positions to consider include:

  • Credit counselor
  • Paralegal
  • office assistant to scan and file documents

Make sure you hire the right person for each position when hiring. Making hiring mistakes can cost you a lot of money and time. Furthermore, it’s easier to hire than to fire. And firing someone is an unpleasant experience for you and for the employee.

When looking at the cost of hiring, rather than looking at the hourly wage, consider the yearly cost. For example, a small staff of just five people can cost in the six-figure range, and that alone will change your perspective when hiring. See how and when to hire a new employee for more on hiring.

Credit Repair Business Considerations

There are a few things to consider before you start. First, decide whether to have an office or work from home. It is cheaper to start at home, but an office gives more credibility.

Be advised that non-law-firm-based credit repair businesses are often required to place a surety bond before they can work.

Finally, consider a credit repair franchise.  There are some up-front fees to start a franchise, but it also gives you name recognition and a proven business model.

Skill Set:

  • Staying current with business matters such as licenses, insurance, and permits.
  • Recording and organizing clients’ financial records.
  • Analyzing credit scores and history from credit reporting agencies.
  • Scheduling appointments.
  • Acquire credit repair leads from banks and credit card companies.
  • Stay up to date with the credit reporting laws.
  • Take action on fixing any credit report errors; if the reporting agency cannot verify a disputed item on a credit report, they must delete it.
  • Contact creditors as needed to settle disputes or make payment arrangements.
  • Determine if there are too many open trade lines causing credit score problems.
  • Make sure paid-off loans show on credit reports.
  • Scan or make copies of all financial information and file per client.
  • Uphold non-disclosure agreements and guidelines.
  • Acquire credit repair leads from banks and credit card companies.
  • Common Business Skills.

Hours of Operation:

General Hours of Operation – When your business is open – 9:00 a.m. to 5:00 p.m., although you may find evening and weekend hours easier for many clients.

Monthly Expenses:

Special Requirements for This Business:

  • Special certifications
  • Surety bond
  • Liability insurance
  • Consumer law knowledge
  • Business law knowledge

Type of Customers You Need to Attract:

  • Anyone with bad credit.
  • People on the verge of bankruptcy.
  • Middle-class suburban families who are attempting to purchase a home.
  • Business owners need assistance most often with obtaining small business loans.

Statistics:

According to creditrepairfirms.net, one in 20 homes has more than $8,000 in credit card debt. In addition, about 40% of credit card users only pay the minimum amount each month.

Revenue:

The average fee varies from $300 to $700 (or more) per case, depending on the credit cleanup. Because this business has wait times for correspondence, you can easily run cases concurrently.

Resources

Listed below are a few resources that can come in handy and help you expand your knowledge of starting a credit repair business.

Books

You can expand your knowledge on any topic by reading books. Also,

the idea of creating a business library isn’t a bad one. A nonfiction book’s table of contents allows you to jump directly to the paragraph containing the information you want.

Try looking at books about starting a credit repair business. View the most recent Google search results for credit repair business books.

Industry News

The media covers many important stories. Take a look at what credit repair stories are in the news.

If you use a site like Google News, you can type in a keyword and get the latest news and any archived stories related to your search.

You can also set up a Google alert to notify you whenever something related to your keyword is published. See Google’s news search results related to the credit repair industry.

Videos

YouTube is a great site for those who enjoy watching videos and learning from them. Several are a waste of time, but some are priceless. Additionally, some authors are professionals looking to build their audience; therefore, they will only publish quality material.

YouTube’s search function is one of its best features. Videos are displayed instantly. It’s more important that you also get a list of related topics you might not have thought of, so I’m always looking for gems in the sidebar. See the most recent videos related to a credit repair business.