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Written by: Esther Strauss
Esther is a business strategist with over 20 years of experience as an entrepreneur, executive, educator, and management advisor.
Edited by: David Lepeska
David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.
Published on May 24, 2021
Investment range
$8,550 - $27,100
Revenue potential
$24,000 - $120,000 p.a.
Time to build
1 - 3 months
Profit potential
$10,000 - $30,000 p.a.
Industry trend
Declining
Commitment
Full-time
Here are the most important things to consider when starting a credit repair business:
Before you dive into starting your business, let’s take a step back and observe what’s happening in the industry.
The credit repair industry comes with both pros and cons. Let’s take a look at some of them.
Economic growth in the post-pandemic recovery could lead to increased demand for credit repair services. As consumers become more confident, they tend to spend more, which results in greater debt and more need for credit repair.
Here are some of the trends shaping the industry:
Some of the challenges faced by operators are:
If you start from home and negotiate monthly payments for your surety bonds and software, you could launch a credit repair business for as little as $5,000. But if you want to invest more in your business and have a large office with staff, you could spend $50,000 or more to cover startup costs and your first month in business.
On average, though, most credit repair startups need around $20,000 to open their doors.
| Start-up Costs | Ballpark Range | Average |
|---|---|---|
| Setting up a business name and corporation | $150 - $200 | 175 |
| Business licenses and permits | $100 - $300 | 200 |
| Business cards and brochures | $200 - $300 | 250 |
| Office rent | $3,000 - $9,000 | 6000 |
| Office equipment and supplies | $3,000 - $4,000 | $3,500 |
| Surety bonds | $1,000 - $10,000 | $5,500 |
| Insurance | $100 - $300 | 200 |
| Website setup | $1,000 - $3,000 | 2000 |
| Total | $8,550 - $27,100 | $17,825 |
The main factors affecting your revenue are the number of clients you have and the primary services they purchase. Naturally, if you get great results for your clients, the more customers you’ll have in the future.
Your clients will usually pay a flat fee or a recurring payment for your services. But it’s up to you to find what structure works best.
Credit repair businesses enjoy profit margins of 25% to 40%, and most charge $79-$129 per month for their services. So if you start out with 20 customers paying $100 a month in your first year or two, you’ll do $24,000 in annual revenue and almost $10,000 in profit, assuming a 40% margin.
If you’re able to push your customer numbers up to 100, you’ll be generating annual revenue of $120,000. At this stage, you’d hire more staff, reducing your profit margin to 25%. You’ll be making $30,000 in annual profit.
There are a few barriers to entry in the credit repair business. The main one is the high level of competition, because it’s easy to start a credit repair business. On the flip side, many of these businesses fail relatively quickly. So if you’re able to stick it out and build a track record as a credit repair specialist, success may knock on your door.
Now it’s time to hone your idea so that your credit repair service can begin taking shape. First, let’s find out how to identify your target market.
Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.
Your competition will be credit repair firms targeting the same market. While large companies that target broad demographics will still compete with you, you’ll have an edge in your market due to targeted branding.
Once you’ve got a list of competitors, here are some questions to examine:
Running a credit repair business requires a varied schedule. Here are a few everyday tasks:
Most credit repair services charge a monthly fee between $79 and $129. While this is the average, to find your ideal rates, you’ll need to consider your costs and the time and effort it takes to complete your service.
Some credit repair services also charge a setup fee for initial document processing and administration. But, this is a grey area as the Credit Repair Organizations Act prohibits credit repair companies from charging upfront service fees. So, as a budding credit repair professional, you likely want to steer clear of upfront fees.
You’ll need to determine an acceptable price for your local market and then tweak it based on expenses. Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.
Identifying your target market is vital for maximizing your marketing dollars and the effort you spend on your business. You’ll first need to determine who would benefit from your services. An answer to your target market could be “people with bad credit.” While this is valid, it’s also too broad. You could narrow your market down by factors like age, gender, and earnings.
For example, you could target millennials who need help improving their credit for first home purchases, or in regards to student loan debt. To market your services to this demographic you might use social media platforms like Instagram and TikTok.
Credit repair businesses can be run from home thanks to technology, but it may be worthwhile to an office, as face-to-face meetings are better for building trust than Zoom calls.
In the early stages, you may want to run your business from home to keep costs low. But as your business grows, you’ll likely need to hire workers for various roles and may need to rent out an office. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.
When choosing a commercial space, you may want to follow these rules of thumb:
Here are some ideas for brainstorming your business name:
Discover over 250 unique credit repair business name ideas here. If you want your business name to include specific keywords, you can also use our credit repair business name generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.
Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these.
Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that set your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.
Here are the key components of a business plan:
If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.
Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.
Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!
Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to credit repair.
If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.
Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your credit repair business will shape your taxes, personal liability, and business registration requirements, so choose wisely.
Here are the main options:
We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.
Choose Your State
The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.
Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.
The IRS website also offers a tax-payers checklist, and taxes can be filed online.
It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.
Securing financing is your next step and there are plenty of ways to raise capital:
Bank and SBA loans are probably the best options, other than friends and family, for funding a credit repair business.
Starting a credit repair business requires obtaining a number of licenses and permits from local, state, and federal governments.
Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits.
You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more.
You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.
This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties.
If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.
Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.
Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your credit repair business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.
Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.
Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.
Here are some types of insurance to consider:
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.
Strong credit repair software options include DisputeBee, TurboDispute, and Credit Repair Cloud.
DisputeBee streamlines the entire dispute process by automating it from start to finish. It allows you to import a client’s credit report to automatically generate dispute letters and track client progress. TurboDispute’s cloud-based software can help you manage everything business-related. From managing your team and clients to your affiliates and leads, they’ve got you covered. CRC provides a robust CRM, automated disputing, and even a recurring billing solution. Their all-in-one platform even helps you scale your credit repair business.
Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.
You can create your own website using website builders. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.
They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google.
Here are some powerful marketing strategies for your future business:
Unique selling propositions, or USPs, are the characteristics of a product or service that set it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your credit repair business meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.
Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your credit repair business could be:
You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a credit repair business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in the credit industry for years and can offer invaluable insight and industry connections.
The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in credit repair. You’ll probably generate new customers or find companies with which you could establish a partnership. Online businesses might also consider affiliate marketing as a way to build relationships with potential partners and boost business.
If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a credit repair business would include:
At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need.
Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.
You’re now ready to start repairing credit and improving lives. Now, how will you find your first client? There are many different ways. You can find business through extensive networking, an efficient referral system, or social media. Remember, having a strong social media presence could spell the difference for you.
On behalf of your clients, you will work with credit bureaus and creditors to remove errors from your client’s credit report. Some examples of creditors include banks and credit card issuers. It’s wise to touch base and establish rapport with these companies first. With these preparations, you should be well on your way to success!
Yes, a credit repair business can be profitable, particularly if you start from home with low overhead costs. It often operates on a recurring revenue model, where clients pay a monthly fee for credit monitoring services.
Starting a credit repair business can be risky, as it is a highly regulated industry that requires compliance with federal and state laws, as well as strict ethical standards.
While it’s not illegal to charge for credit repair services, it is illegal to charge any upfront fees. The Credit Repair Organizations Act states that no credit repair organization can charge or receive any money or valuables for any service before the service is rendered. So make sure that you don’t charge upfront fees for any credit counseling.
To acquire credit repair clients, establish a strong online presence, utilize social media, offer free educational resources, network with professionals, obtain client testimonials, and consider targeted advertising.
The duration of the credit repair process varies based on individual circumstances, the complexity of credit issues, and the effectiveness of the chosen strategies. It can take several months to a year or more to see significant improvements in credit scores and overall credit health.
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