How to Start a Credit Repair Business

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Many consumers turn to credit repair businesses for help getting out of debt.
Many consumers turn to credit repair businesses for help getting out of debt. (Image: Comstock/Stockbyte/Getty Images)

The great recession of 2008 caused thousands of U.S. businesses to close, wages to shrink and left millions of Americans struggling under crushing consumer debt. It also fueled new government regulations and banking rules that tightened access to credit. The double whammy left countless Americans unemployed, drowning in debt and unable to secure help to cope with the new economic reality. The credit repair industry, which had been around for decades, exploded in response to sudden consumer desperation. The industry grew rapidly and currently provides many franchising and affiliate programs for entrepreneurs to start a credit repair business.

Business Models

Entrepreneur magazine contributor Tim Berry suggests following the basics. Research your market, create a business plan, obtain capital as well as permits and licenses, secure a location and open your doors. This approach can be time consuming and expensive particularly if you are new to the industry; however, Credit Repair Cloud, Credit Repair Business and many more companies market turnkey kits, which reportedly include all the training, tools and certifications you need to start a credit repair business. The investment required varies from nothing to several thousand dollars.

Industry Connections

New entrepreneurs often join professional organizations to build a personal network of seasoned professionals willing to give help and support. Two professional associations open to you if you intend to start a credit repair business are The Credit Consultants Association and The National Association of Credit Services Organizations. CCA offers low-cost training and board certification; however, neither the accreditation nor location of said board is clear. NACSO backs and bestows a “Standards of Excellence” distinction, but their website doesn’t elaborate about those standards nor does it make the costs or benefits of membership clear.

Legalities

Federal and state laws limit the services that a credit repair business can provide to those that consumers can complete themselves free. While many in the industry advertise or insinuate the ability to remove negative entries regardless of the entry’s legitimacy, credit bureaus have no obligation to remove accurate entries and practices that manipulate names and/or social security numbers to improve credit scores are federal felonies. Additionally, a credit repair business cannot legally charge clients until contracted services have been completed and certified to have met the client’s satisfaction.

Reassess

According to Steven Baker, director of the Federal Trade Commission's Chicago regional office, "We've Never Seen a Legitimate Credit-Repair Operation." The FTC website warns consumers that the claims made by credit repair businesses are most likely scams and the Better Business Bureau’s Sharane Gott concurs, saying the agency “has great concerns about companies in the credit repair industry that make promises they can't keep." While it is easy to start a credit repair business, the industry’s reputation among consumer organizations may make you want to reconsider.

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