How to Start a Credit Repair Agency

Start a Credit Repair Agency by following these 10 steps:

1. Plan your Credit Repair Agency
2. Form your Credit Repair Agency into a Legal Entity
3. Register your Credit Repair Agency for Taxes
4. Open a Business Bank Account & Credit Card
5. Set up Accounting for your Credit Repair Agency
6. Get the Necessary Permits & Licenses for your Credit Repair Agency
7. Get Credit Repair Agency Insurance
8. Define your Credit Repair Agency Brand
9. Create your Credit Repair Agency Website
10. Set up your Business Phone System

We have put together this simple guide to starting your Credit Repair Agency. These steps will ensure that your new business is well planned out, registered properly and legally compliant.

Exploring your options? Check out other small business ideas.

STEP 1: Plan your business

A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:

• What will you name your business?
• What are the startup and ongoing costs?
• Who is your target market?
• How much can you charge customers?

Luckily we have done a lot of this research for you.

What will you name your business?

Choosing the right name is very important. Read our detailed guide on how to name your business. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.

What are the costs involved in opening a Credit Repair Agency?

Startup credit repair agency costs are fairly minimal, averaging $10,000 in total costs. Since the majority of your work will take place online, you don’t need to secure office space. Your home office should be equipped with a computer and monitor, a dedicated phone line, and internet.

Most states require that all credit repair agencies obtain a surety bond. This bond protects clients against any potential damages, up to the bond’s limits, and cost between $200 and $300.

A merchant account is required for any functioning business that wishes to accept debit and credit card payments. Most banks, however, are unwilling to accept the risks associated with credit repair agencies. Conduct thorough research and partner with a credit repair merchant service that understands and can support your business needs.

While not required, investment in credit repair software is recommended and represents your biggest out-of-pocket expense. Software costs range anywhere from $179 to $900 a month, tempting many entrepreneurs to forego this expense. Industry leaders advise against this; however, reporting a 400% increase in revenue in just over a year.

Business owners desiring the backing and expertise of established organizations should consider purchasing a credit repair franchise. Franchise fees range from $9,500 to $15,000 and provide you with all the tools you need to get started.

What are the ongoing expenses for a Credit Repair Agency?

Ongoing expenses for your agency will be similar to startup costs. In addition to the standard overhead costs, your budget should include credit repair software fees, insurance, surety bond, and payroll. Entrepreneurs with long-term growth and success goals are encouraged to include ongoing education in their monthly expense budget.

Who is the target market?

At first glance, one would think that your target market includes any individual with a negative credit history. Research indicates, however, that consumers under age 24 and over 65 either have a sound credit score or are not concerned with taking the necessary steps to repair their score. Your marketing efforts should be more direct, targeting consumers over the age of 25 or who have recently been turned down for a loan.

How does a Credit Repair Agency make money?

While most actions required to increase one’s credit can be done by the consumer, many are unfamiliar with and intimidated by the process. They look to credit repair agencies to educate them regarding their unique situation and to represent them throughout the dispute and repair process. Agencies charge a subscription fee, flat fee, or charge per deletion.

How much can you charge customers?

When developing your business plan, carefully research competitor pricing and fee structures, as well as your cost per acquisition. Larger, established organizations charge $90 to $125 per month while others charge a fee for each dispute they successfully settle. Industry leaders encourage new agencies to remain flexible, restructuring their pricing as the need arises.

How much profit can a Credit Repair Agency make?

Annual profit is directly tied to your fee structure and the number of clients you service every month. If you assist 200 clients who each pay $89 a month, that equals $17,800 in monthly revenue. If you reach $500 clients, you will earn a monthly recurring revenue of $44,500.

How can you make your business more profitable?

Agency owners looking to maximize profits will need to have a strong, targeted marketing strategy, hiring additional repair professionals to the team as the company begins to grow.

STEP 2: Form a legal entity

The most common business structure types are the sole proprietorship, partnership, limited liability company (LLC), and corporation.

Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your Credit Repair Agency is sued.

You can form an LLC yourself and pay only the minimal state LLC costs or hire one of the Best LLC Services for a small, additional fee.

STEP 3: Register for taxes

You will need to register for a variety of state and federal taxes before you can open for business.

In order to register for taxes you will need to apply for an EIN. It's really easy and free!

There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.

STEP 4: Open a business bank account & credit card

Using dedicated business banking and credit accounts is essential for personal asset protection.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.

Open a business bank account

Besides being a requirement when applying for business loans, opening a business bank account:

• Separates your personal assets from your company's assets, which is necessary for personal asset protection.
• Makes accounting and tax filing easier.

Get a business credit card

Getting a business credit card helps you:

• Separate personal and business expenses by putting your business' expenses all in one place.
• Build your company's credit history, which can be useful to raise money later on.

STEP 5: Set up business accounting

Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.

Make LLC accounting easy with our LLC Expenses Cheat Sheet.

STEP 6: Obtain necessary permits and licenses

Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.

State & Local Business Licensing Requirements

Certain state permits and licenses may be needed to operate a Credit Repair Business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.

STEP 7: Get business insurance

Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.

There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.

Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.

Is this Business Right For You?

Your work as a credit repair agent will significantly impact your clients’ lives for many years to come. Therefore, those considering this business venture should be prepared to commit to the well-being of each customer as well as maintaining a masterful knowledge of the industry, its governing rules, and regulations.

What happens during a typical day at a Credit Repair Agency?

While the specifics will vary depending upon each client’s needs, your duties as a credit repair agent will be similar from day to day:

• Onboarding new clients
• Providing customer service - answering questions and keeping clients informed of all progress
• Analyzing their unique credit situation
• Entering details into credit repair software
• Generating and forwarding dispute letters

What are some skills and experiences that will help you build a successful Credit Repair Agency?

While this industry is poised for significant annual growth, it is important to remember that many organizations fail to deliver what they are hired to do. Therefore, it is critical that startup business owners have a well-thought-out marketing strategy that establishes themselves as leaders in the industry. Most of your clients will come to you frustrated and ambivalent; it is your job to reassure and educate them regarding the credit repair process. Strong communication and listening skills and extensive knowledge regarding credit repair will be the cornerstone of your agency’s long-term success and growth.

Agents should be committed to learning as much as they can about the industry and should remain abreast of the latest rules and regulations. Networking, attending conferences, and subscribing to relevant blogs will help you position yourself as an industry leader.

What is the growth potential for a Credit Repair Agency?

This industry has experienced steady growth year after year, with projected market revenue of over $15 billion by 2025. Agency owners possessing drive, industry knowledge, and a targeted marketing strategy have the potential to realize significant annual growth