If you’ve been looking for a side hustle or entrepreneur opportunity, you may have come across credit repair companies. These businesses are popping up around the globe to help borrowers (both individuals and businesses) correct their credit scores.
You may be wondering what a credit repair company is and how it works? More importantly, is this a business opportunity for you? Here’s everything you need to know about credit repair companies.
What is a Credit Repair Company?
Credit repair companies help their clients improve their credit score. They’re usually hired when a person has a history of bad credit that they need to correct or when someone wants to qualify for a specific loan option.
A credit repair company goes through the process to have negative items removed. This is a process that anyone could engage in on their own. However, the credit repair company knows the right process to follow to have it done swiftly and correctly while following the proper channels. As with any service, the value comes from having the experts solve the problem.
How do Credit Repair Companies Work?
Credit repair businesses start by reviewing the client’s credit report and highlighting any negative items. Negative items are the charges and records that negatively impact one’s credit score, such as bad debt or something that went to collections.
The credit repair company filed disputes and manages the back and forth with loan officers, credit bureaus, collection agencies, etc. All of these communications and disputes are done within the boundaries of the law, including the Credit Repair Organizations Act (CROA).
Can You Make Money with a Credit Repair Company?
By following the proper channels, you can make money by starting a credit repair company. While there are a lot of effective strategies for running a credit repair company, the usual approach is to use a monthly subscription payment model. As the credit repair process can last for a while, this is the best way to ensure that your efforts are covered.
While collecting subscription payments is an effective model, you’ll need to be able to prove your value to customers. This includes putting together regular updates and showing progress made from month to month.
Starting a credit repair business isn’t a “get rich quick” scheme. It could take months or even years before it becomes a profitable, sustainable business.
Tips for Starting a Credit Repair Business
If you decide that you want to start a credit repair business, there are a few things you can do to improve your chances of success. Here are some helpful tips to get you started.
Understand How Credit Scores Work
Before you do anything else, take some time to understand how credit scores work. You can start by reviewing your personal credit report. It’s also worth investing in courses to better understand the various impacts on one’s credit score to be able to strategize solutions.
Understand the Legalities
It’s essential that you adhere to the regulations put in place by the FTC. For example, as a part of the CROA, you are not allowed to take payment from a customer until you’ve done some work. This could be something as simple as a free initial consultation before signing a contract (which is also required by the CROA). You may also be required to secure a surety bond, depending on your location.
In addition to reviewing the legalities surrounding your business, it’s also worth taking time to review the Fair Debt Collection Practices Act (FDCA).
Create a Business Plan
Your credit repair business should be planned the way you would plan nay other business. Create a business plan that outlines how much money you’ll require to get started, your SOPs, how you’ll secure clients, your payment schedules, etc. It’s also worth outlining which dispute tracking software you will use— this is highly recommended to make your business scalable.
Is a Credit Repair Company Right for You?
If you enjoy solving problems and helping people, then a credit repair company might be the right business for you. Take your time researching the opportunity to ensure it aligns with your goals.
Read also: 10 Best Online Business Ideas to Make Money in 2020