How to Start a Business to Fix Damaged Credit
A person seeking to obtain loans to buy cars, houses, or even a job needs to have a good credit score. Unfortunately, due to a number of reasons, a consumer may have a low credit score, which needs to be fixed. Instead of repairing these credit issues herself, she may seek your expertise to do so for a fee. Follow these steps to set up a profitable business to fix damaged credit.
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Instructions
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Ensure your business is legally structured. Speak with your local certified public accountant or lawyer to determine which business entity is best. Typically, an LLC, C, or S corporation will be fine. Operating under a protected business entity protects your personal assets from being seized if you are ever sued.
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Find out if there are any licenses required to repair credit in your state. You can visit your local Chamber of Commerce or your Secretary of State's website to find specific licensing information. This step is critical because many credit repair businesses accept payment first and then repair their customer's credit. In some states (e.g., California), this is illegal. You must repair the credit first, and then accept payment. Each state, however, operates differently.
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Determine how you will obtain payment from your customers. Some companies allow their customers to pay monthly and they can cancel anytime, while others require a one-time payment. Which ever method of payment works for your business, make sure you have a business checking account or a merchant account processor so you can accept the payment or recurring payments via credit card.
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Stay up to date on the credit reporting laws. Frequently review The Fair Debt Collection Practices Act and The Fair Credit Reporting Act, both located on the Federal Trade Commission's website, www.FTC.gov. These laws allow you to legally dispute transactions on your customers' credit report to effectively repair them.
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Consider purchasing credit repair software. Due to the popularity of this industry, there has been software created to allow you to keep up with your current clientele and print out the legal documents to be sent to collection agencies, original creditors, and the credit bureaus. Depending on the number of customers you have, this may make your job easier.
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Tips & Warnings
Consider starting a credit repair business under a franchise. There are credit repair companies you can be a part of that require a monthly franchise fee. In exchange, they train and allow you to use their company brand and advertising to obtain customers.
Credit repair agencies have in some cases gotten a bad name. Make sure you are operating legally and ethically to minimize any issues.
