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How do I Start a Credit Repair Business?

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  • Written By: Lainie Petersen
  • Edited By: Melissa Wiley
  • Last Modified Date: 03 December 2016
  • Copyright Protected:
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    Conjecture Corporation
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If you want to start a credit repair business, you need to learn and follow the laws that license or regulate credit repair where you plan to practice. If your main focus in starting a credit repair business is helping people remove information from their credit report, you should begin by understanding the laws that govern credit reports where you live as well as the licensing laws governing credit repair. Opening a business focused on credit counseling and debt negotiation may require you to obtain formal training.

A credit repair business helps individuals with credit problems to clear their credit record. Due to the fact that people with bad credit histories often have difficulty getting credit, jobs, or housing, many are desperate to find ways to remove negative items from their credit report. Unfortunately, the credit repair industry has a reputation in many places for taking advantage of this desperation and taking money from clients but either not performing services or encouraging clients to take illegal steps to clear their credit. For this reason, many places now have laws that regulate the credit repair industry.

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In the United States, for example, both federal and state laws govern credit repair services. The federal Credit Repair Organizations Act requires that a credit repair business owner provide clients with a statement that explains that she cannot do anything for the debtor that the debtor cannot do for himself. Federal law also prohibits a a credit repair company from accepting any money until it has performed some services for the client. State laws can be even more precise, requiring that a credit repair business obtain a specific business license and explicitly defining what actions a credit repair business can and cannot take on behalf of its client.

Similar laws are in place in the United Kingdom, which can require credit repair businesses to be licensed. These businesses may also be required to meet certain guidelines in their advertising and marketing material. Other countries may have stricter or more lenient credit repair business laws in place.

Other types of debt repair businesses include credit counseling and debt negotiation. Credit counseling often involves a combination of consumer education, showing clients how to improve their credit score by challenging inaccurate credit information, and, in some cases, setting up a debt management plan. Debt negotiators, on the other hand, contact creditors and attempt to lower their client's debt so that the client can pay it off in one lump sum. If you plan to offer either of these services, you may have to obtain additional training and licensure. You may also be required to purchase a surety bond.

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