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How To Start A Credit Repair Business

How To Start A Credit Repair Business

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How To Start A Credit Repair Business

How To Start A Credit Repair Business

Are you seeking a business opportunity that not only benefits you but also makes a positive impact on people’s lives? Look no further than starting your own credit repair business.

In an era where credit scores dictate life’s major decisions and millions of people struggling with credit issues, starting a credit repair business presents a golden opportunity. To help you get started, our guide will take you through the steps to get started, answers to common questions, and more.

Business Description

A credit repair business is a specialized financial service that helps individuals and businesses improve their credit scores. It’s a role that is becoming increasingly necessary as more people struggle with managing their credit, affecting their ability to secure loans, buy homes, or even start businesses. As a credit repair service, your business will search for, identify, and dispute incorrect information from the credit bureaus that may appear on your client’s credit report. The goal is to improve your client’s credit rating.  

Specifically, the services a credit repair business provides include:

  1. Credit report analysis: This involves reviewing a client’s credit report from the three major credit bureaus (Experian, TransUnion, and Equifax) to identify errors or discrepancies that could be negatively impacting their credit score.
  2. Dispute management: If mistakes or inaccuracies are found in a client’s credit report, the credit repair business will dispute these with the credit bureaus on behalf of the client. This process requires knowledge of credit laws and regulations, as well as strong negotiation skills.
  3. Credit counseling: A credit repair business also provides guidance and advice to clients on how to improve their credit scores over time. This might include tips on responsible credit use, debt repayment strategies, and financial management.
  4. Negotiation with creditors: In some cases, a credit repair business might negotiate with creditors on behalf of the client to lower interest rates or agree on forgiving certain debts.

Revenue is typically generated through service fees, including monthly subscriptions, pay-per-delete for each dispute resolved, or consultation fees.

Industry Summary

The credit repair services industry in the United States is a sizable one, generating roughly $6.6 billion in revenue annually.1 With the average American holding over $103,000 in debt2, the need for credit repair services continues to grow. This growth is driven by various factors, including rising consumer debt, an increase in credit usage, and a growing awareness of the importance of good credit health.

However, the industry remains countercyclical – during broader economic downturns, higher debt, and defaults swell demand for repairing credit. Over 35% of Americans with credit files have subprime credit scores below 670.3 As this segment grapples with pandemic impacts, demand could rise among more distressed consumers despite overall projections.

The credit repair industry is highly competitive, with many established and emerging companies vying for a share of the market. However, the industry’s growth potential remains strong, making it an attractive choice for aspiring entrepreneurs who want to positively impact people’s lives while running a successful business.

Steps To Start A Credit Repair Business

Step 1: Write a Business Plan

When starting a credit repair business, the first step may not be what you might expect. It’s not about diving into the legalities or even about understanding credit scores. The first step should be crafting a business plan. While it may be tempting to jump right in and get things rolling, taking the time to develop a comprehensive business plan can impact the success of your business. Here’s a few reasons why.

It provides a roadmap for your business: A business plan outlines your goals, strategies, and tactics. It helps you stay organized and focused on what matters most, making it easier to achieve your objectives.

It helps you estimate startup costs: By using financial projections, a business plan helps you estimate the initial investment required to start your credit repair business. This can help you avoid costly surprises down the line.

It evaluates the profitability of the business: A business plan outlines the revenue streams and expenses of your credit repair business. This helps you gauge the potential profitability of your business, identify areas where you can cut back on expenses, and optimize operations to increase revenue.

It outlines your marketing strategy: Market research helps you identify your target audience, understand their needs, and develop a marketing strategy that aligns with your goals. A business plan provides a framework to analyze market data, making it easier to make informed decisions.

It supports funding: If you plan to seek funding or investment for your credit repair business, a business plan shows that you have a solid understanding of the market and a clear roadmap for success.

Related: How to write a business plan

Step 2: Source Funding

The cost of starting such a business can be a barrier for many entrepreneurs. Even though the cost to start a credit repair business can be on the lower side, it’s a good idea to make sure you have the funds in place before going much further. Here are some common funding sources to consider.

Personal savings: The first place to look is your personal savings. This can include dipping into your personal savings account or retirement plan and often serves as the primary source of startup capital for a credit repair business. If personal savings aren’t enough, outside sources will be needed.

Traditional lenders: Banks and credit unions are sources to consider for funding. Lenders usually require borrowers to invest at least 15% of their personal funds towards the total cost of the project and also require a good credit score and sufficient collateral. If the bank feels that the loan is too risky, they can use a Small Business Administration loan guarantee to protect their investment.

Family and friends: Another option is to lean on your family and friends for financial support. When borrowing from family and friends, it’s important to treat this arrangement professionally. Clearly outline repayment terms, interest rates (if applicable), and put everything in writing to avoid any misunderstandings or disputes in the future.

Microloans: If you only need a small amount of funding or if traditional lending options are unavailable to you, microloans may be an alternative. These are provided by local economic development organizations. In some cases, they also offer business training along with the funding.

Credit cards: Using credit cards for initial funding is an option, but be cautious of high interest rates. This route is best for short-term financing with a clear repayment plan.

Related: Finding the money to start a business

Step 3: Register the Business

The next step for starting a credit repair business is to understand and comply with the legal requirements for registering and operating a credit repair business. The requirements vary by state, but here is a general overview:

Business structure: The first step is choosing a business structure. Common options include sole proprietorship, partnership, Limited Liability Company (LLC), or corporation. Each structure has its own benefits and considerations.

  • Sole proprietorship: This is the simplest form of business structure, where you, as the owner, are solely responsible for all aspects of the business, including liabilities. The advantage of this structure is its ease of startup and lower costs.
  • General partnership: Similar to a sole proprietorship but for two or more people. Partners share responsibility and liability, which means personal assets could be at risk if the business faces legal trouble.
  • Corporation: A more complex structure offering liability protection, as the business is a separate legal entity. It involves more administrative requirements and higher costs.
  • Limited Liability Company (LLC): Combines the ease of a sole proprietorship or partnership with the liability protection of a corporation. It’s a popular choice for small businesses due to its flexibility and protection.

Related: Comparison of business structures

Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.


Some popular LLC formation services include:


IncFile - $0 plus state fees & free registered agent for 1 year!

ZenBusiness - Best for beginners. $0 plus state fees & free registered agent for 1 year!

Northwest - Best privacy protection. $39 plus state fees & free registered agent for 1 year!

Business name registration: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state during the formation process.

During this time, it’s also a good idea to check if the name you want is available as a web domain, even if you’re not ready to set up a website yet.

Related: Finding a domain name for your business

Understand and comply with the Credit Repair Organizations Act (CROA): The Federal Trade Commission (FTC) sets out federal requirements for credit repair businesses, including prohibited practices and required disclosures. 4

Check state regulations: Each state has its own laws governing credit repair businesses. For example, in Texas, credit repair businesses must register with the Secretary of State and submit a bond. In California, they need to register with the Department of Justice. Be sure to understand and comply with the laws in your state.

Privacy and data security: Compliance with privacy regulations, such as the Fair Credit Reporting Act (FCRA)5 and the Gramm-Leach-Bliley Act6, is crucial. These laws govern the handling and protection of clients’ personal and financial information.

Obtain business licenses and permits: Depending on your location, there will likely be a variety of general registrations, such as a business license, seller’s permit, and Employer Identification Number (EIN).

Related: State guides for general business licensing

Step 4: Set Up Operations

Setting up the operations for your credit repair business is the next step of this journey.

You’ll need to decide where to locate the business in this phase. Many credit repair businesses start from a home office, which can significantly reduce overhead costs. Operating from home allows you to save on rent, utilities, and commuting costs. On the other hand, renting a commercial space might lend more credibility to your business, particularly if you plan to meet clients face-to-face. An office location can also provide room for staff expansion as your business grows. Weigh the pros and cons of each option and choose what works best for you and your business.

Regardless of your location, you’ll need basic office equipment and software to run your business. This includes computers to access credit reports and communicate with clients, printers for any necessary paper documents, and telephones for client consultations and follow-ups. This also includes systems for client management, credit report analysis, dispute filing, and follow-up. Specialized credit repair software can streamline these processes and ensure data security, a critical aspect given the sensitive nature of the information you’ll be handling.

Step 5: Prepare to Launch!

As you wrap up the steps for starting your credit repair company, there are several remaining tasks to consider. These tasks will vary based on your individual needs and preferences, but here are some areas to focus on:

Hiring: If you’re planning to hire staff initially, consider the hiring process, including defining roles and responsibilities.

Business Insurance: Common types of insurance for a credit repair business include general liability insurance, professional liability insurance (also known as errors and omissions insurance), and cyber liability insurance. These policies can safeguard your business from financial losses, lawsuits, and data breaches. Some states also may require credit repair businesses to obtain a surety bond, which is a type of insurance to protect clients from potential fraud or unethical practices.

Setting Up bookkeeping: Establish a system for managing your business’s finances, including daily transactions, taxes, and financial statements. You can choose to hire a bookkeeper or utilize accounting software to handle these tasks efficiently.

Contracts: Create compliant contract templates to outline the scope of your services, fees, and any limitations. Ensure that your contract adheres to applicable laws and regulations.

Opening a business bank account: Open a separate bank account specifically for your credit repair business. This will help you keep personal and business finances separate, making it easier to track income and expenses.

Creating a marketing strategy: Creating a marketing strategy is crucial to let potential customers know about your new business. This can include developing a unique logo and web presence to establish your brand identity and create a consistent tone of voice throughout all marketing channels, in addition to utilizing social media, email marketing, search engine optimization, and paid advertising.

Common Questions To Start A Credit Repair Business

How much does it cost to start a credit repair business?

Starting a credit repair business involves several costs that vary depending on numerous factors, such as state requirements, marketing approach, and business model.

Based on my research, the average estimated total cost to start a credit repair business can range from $2,000 to $5,000. Here’s a breakdown of common expenses:

Office setup: The cost of setting up your office largely depends on whether you choose a home office or a commercial space. For a home office, you might only need to account for the cost of office equipment, which can be around $2,000 for a computer, printer, and telephone system, which you may already have. If you opt for a commercial space, you’ll also need to consider the cost of rent and utilities. Initial deposits for commercial spaces will vary, but can easily reach $2,000 or more.

Business registration: Registering your business is typically an affordable process, but costs vary by state. On average, expect to pay around $100 to $500 for registration fees and any necessary licenses or permits.

Insurance: Some states require credit repair businesses to obtain a surety bond, which is a type of insurance. The cost for a surety bond varies based on the required amount and your credit score, but it could range from $100 to $200 for a $10,000 bond.

Marketing: Initial marketing costs can include creating a logo, building a website, and launching your first advertising campaign. Depending on how much you do yourself versus hiring professionals, you could spend anywhere from $500 to $2,000 on these initial marketing efforts.

Software: Examples include Credit Repair Cloud, ScoreCEO, and DisputeBee, which offer plans ranging from free to $100 per month. So, you might spend around $100 to $300 initially.

How profitable is a credit repair business?

The profitability of a credit repair business can vary greatly depending on its size, location, and the efficiency of its operations. However, we can make some educated assumptions based on available industry statistics.

Let’s break down potential revenue and expenses to estimate the profitability of an average credit repair business, keeping in mind that these are rough estimates:

Revenue: The revenue of a credit repair business typically comes from service fees charged to clients. If we assume that an average credit repair business serves around 100 clients per year and charges a monthly fee of $100 for 6 months (the average time it takes to see significant improvement in credit scores), that would generate annual revenue of $60,000.

Expenses: Starting costs aside, running a credit repair business involves ongoing expenses such as rent (if applicable), utilities, employee salaries, software subscriptions, and marketing costs. For our example, let’s estimate these costs at $30,000 per year.

Profit: Subtracting the estimated expenses from the revenue gives us a potential annual profit. In this case, $60,000 (revenue) – $30,000 (expenses) = $30,000. This indicates that an average credit repair business could potentially make a profit of around $30,000 per year.

Keep in mind that this is a simplified example and actual profit can vary based on many factors. It’s also important to remember that it may take time for a new business to become profitable.

What skills are needed to run a credit repair business?

Expertise and credentials: Although education requirements are not prescribed for this industry, a degree in business management and a solid understanding of financing, accounting, and relevant regulations will give you the knowledge and practical experience needed to help you achieve good client outcomes. 

Additional certification or specialization will ensure you keep up to date with all regulatory requirements and updates. It will also increase your business’ market reach. Joining relevant networks such as the Credit Consultant Association or the National Association of Credit Services Organizations can give you a competitive edge through resources and professional advice.

Negotiation and communication skills: Be prepared to be a good listener but also have the ability to report back to your clients concisely and professionally. 

However, a large part of your role will be communicating and negotiating with credit reporting agencies such as Equifax, Transunion, or Experian. You’ll need to understand the process of getting a negative item off a credit report and the laws and regulations supporting this.  For such matters, you’ll need good verbal skills and impeccable written skills to draft dispute letters and respond to credit report errors and other related issues. 

Organization: Being organized and pragmatic are two excellent skills to have when running your credit repair business — in addition, having a system that keeps client details secure and not mixed up with one another is essential. 

Be prepared to scan reports and supporting documentation to search and identify incorrect details. You will need to be methodical, focused, and have an eye for detail.

What is the NAICS code for a credit repair business?

The NAICS code for a credit repair business can fall under a few different codes such as:
– 541990 – Other Professional, Scientific, and Technical Services
– 541618 – Other Management Consulting Services

The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.

Related: What is a NAICS code?

Final Thoughts

If you are a patient and methodical person, an excellent fact-finder with a passion for finances, and looking to make a difference in people’s lives, starting a credit repair service offers a relatively easy way to becoming your own boss. You can start small, with relatively low investment, and then grow and expand your business over time.

  1. IBISWorld ↩︎
  2. Experian ↩︎
  3. Experian ↩︎
  4. Federal Trade Commission – Credit Repair Organizations Act ↩︎
  5. Federal Trade Commission – Fair Credit Reporting Act ↩︎
  6. Federal Trade Commission – Gramm-Leach-Bliley Act ↩︎

How To Start A Credit Repair Business

How To Start A Credit Repair Business

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