Credit is a necessary component of anyone’s financial life, for better or worse. Access to financing for major purchases like a car purchase or buying a home requires a solid foundation of good credit. But now, it’s standard practice for employers, insurance companies, and landlords to take a close look at an applicant’s credit history when making a decision on a job offer, premium costs, or to rent or not.
A healthy credit score and clean credit report means paying on time, managing debt wisely, and avoiding the negative marks that can plague a financial profile, such as a late payment, bankruptcy or a tax lien. While simple in theory, keeping credit on the up and up isn’t always the most straightforward task.
Out of the 220 million Americans with scorable credit, an estimated one-third have a score of 601 or lower. Scores that fall below this mark make it challenging to get access to credit when it’s needed, as potential creditors and lenders view this as a substantial risk. Enter credit repair businesses, stage left.
Credit repair businesses are popping up right and left in an effort to help individuals with low credit scores improve their overall financial profile for the long-term. Business-minded individuals have the potential to create a lucrative side hustle or even a full-time career by offering credit repair services to the masses – and all without spending much of anything upfront.
Why Credit Repair as a Side-Hustle or Full-time Business?
Above and beyond the statistics about the state of credit scores throughout the country that lend themselves to an established market of potential customers, starting a side hustle or business in the credit repair industry has several perks. First, working as a credit repair professional does not require a college degree, nor does it necessitate years of training. Some education in the process of credit repair is needed, as services revolve around disputing errors on customer credit reports and negotiating their removal with creditors and credit bureaus. However, the training necessary to become a credit repair professional doesn’t require a significant investment of time or cash.
Also, credit repair businesses typically follow a subscription or monthly-fee model. This means that customers, after an initial consultation, pay for services rendered until they no longer need or want the service. Credit repair as a side hustle can generate a steady stream of monthly revenue for those who structure it correctly.
Credit repair professionals also have the option of working on a full- or part-time basis. Although some experts suggest that dedicating 40 plus hours per week is necessary to make a successful go at a credit repair business, others give the green light for those who want to create a side hustle in addition to a full-time job.
Finally, establishing a credit repair business on the side offers the satisfaction of helping people get through credit issues that occurred due to no fault of their own. Working through errors on someone’s credit report and resolving incorrect or inaccurate entries can boost one’s credit score by a few to more than 100 points. This can be the difference between qualifying for an affordable, low-interest rate loan and getting completely declined.
But most importantly, starting a credit repair side hustle doesn’t require a massive upfront investment. With a little research, laptop, smartphone and credit know-how, you can launch a fruitful credit repair business in no time at all.
How to Start a Credit Repair Business
For those who see the benefits of starting a credit repair side hustle or business, there are specific steps to follow to get off the ground successfully. Even though there are a few requirements to follow through, it is important to understand these necessities before getting started.
CROA Requirements
Federal laws regulate credit repair businesses under the Credit Repair Organization Act. Even if services are provided as a side hustle, credit repair professionals need to ensure they understand and comply with this law. Under CROA, a federal law passed in 1996, any company offering credit repair services must advertise and communicate with the public honestly. Businesses in the industry cannot promise to remove accurate items from a credit report, nor can they guarantee a credit score increase for consumers. The law also prohibits companies in credit repair from charging large payments before services are rendered.
State Requirements
Although there is no blanket requirement for credit repair businesses to obtain a license in the state they want to conduct business, some states may have registration or surety bond requirements. A business may have to register as a credit repair organization in order to operate legally in the state.
With that registration may come a need to purchase a surety bond. This credit repair organization surety bond helps protect consumers from fraudulent businesses. If a claim is made against a surety bond, the credit repair company is required to repay that claim amount to the surety company. This can be an added cost of doing business. Check with the local licensing authority to determine what may be necessary for your state.
Complete Training
There is no mandate that credit repair professionals earn a degree or go through a specific training program in order to start a business. However, having the right training helps in laying the groundwork for a successful company. Several businesses offer training for credit repair professionals, focused on the process by which errors can be removed from consumer credit reports. Completing a training program can be incredibly beneficial in ensuring that the services offered to customers are easily and effectively implemented.
Gather the Right Tools
Although credit repair services can be delivered without the help of software, many credit repair professionals opt to use the help of technology to streamline business operations. Credit repair software can help with onboarding new customers, automating the dispute process, and keeping track of payments and expenses each month. Additionally, having a professional website, a social media presence, and a way to organize business financials can be crucial to sustainable success as a credit repair company.
Benefits and Downsides to Consider
As a credit repair company, there are both benefits and downsides to consider in operating this type of business. One of the biggest draws the credit repair industry is the ability to help others raise their credit scores over time. When that takes place, consumers have the chance to gain access to the financing they need for significant purchases – from buying a car to purchasing a home. This can be a life-changing experience for those who feel as though they can’t raise their credit score alone.
Above and beyond this emotional perk of being a credit repair professional, the following also lend a hand in making the business model a popular choice:
- The opportunity to work for yourself, from home, during the hours that you choose
- Flexibility to grow the side hustle into a full-time business through word of mouth referrals or online advertising
- Establishing a steady income stream from customers
- Minimal upfront costs to get started
- A constant stream of potential customers
However, it is just as important to consider the risks that go hand in hand with being in the business of credit repair. The most common risks include:
- The cost of advertising and marketing in a highly saturated industry
- The time it takes to learn credit repair strategies and tactics
- The upfront cost of business licensing, registration, or a surety bond
- Legal risks that lurk around the corner for those who do not comply with state or federal regulations
- The expense of software, customer management tools, and payment portal
It is essential to weigh the advantages of a credit repair business against the risks to ensure this is the right fit as a business or side hustle.
How Much Can a Credit Repair Business Make?
Some individual credit repair experts can make several thousands of dollars each month, all from the comfort of their home. However, high earners in the industry typically work full-time, have a steady stream of new customers coming in the door, and put in place a robust marketing strategy with the help of social media.
For credit repair side hustles, the amount of money to be made depends on the price you charge for services and the number of customers you can work with each month. For instance, someone who charges a $99 set-up fee along with a $99 monthly fee can easily earn $3,000/mo with 30 steady clients.
Now, each client typically requires somewhere between 30 and 40 minutes of work each month, so it’s necessary to calculate the time you have available before you start bringing on customers. A credit repair professional who has the capacity to take on twice as many clients could earn upwards of $6,000 per month, still working part-time. Once you build up a solid base you should haven’t to go looking for clients as much and can rely more heavily on referrals. It’s really nice when most of your clients are all set-up and your software is automatically collecting your recurring monthly fees.
Tips for Success
If you’re starting to see the benefits of launching a credit repair side hustle of a full-time credit repair business, you’ll need to know what it takes to be successful from the start. In addition to complying with federal and state laws, you also want to take to heart the following tips:
Find a Niche
It may seem as though any group of consumers may have a few prospects for credit repair services, but the most successful credit repair pros have a niche. Choose a demographic you are comfortable with or have personal experience with and start there. Casting a wide net in terms of marketing your credit repair side hustle may result in new customers, but it will be hard to sustain and costly to do so. Hone in on a target audience and focus your attention there for gaining new customers.
Online Presence is Key
Even if a credit repair business is only a part-time gig, it is beneficial to invest in a website, social media pages, and e-mail marketing when possible. Having a website puts a professional face to the business and helps with ensuring legitimacy. Social media can be a great place to passively market to a niche audience, while e-mail marketing campaigns can create a steady flow of new prospects. These tools come at a cost but are inexpensive for this type of business because you don’t need a lot and can do most of it yourself. It will be worth it in the long run.
Start with Who You Know
When you’re just getting started with credit repair, start with friends and family or past co-workers and colleagues as customers. Share that credit repair is a new passion of yours, and that you are willing to provide the service at a discount to those who may be interested. When the work is complete, ask for referrals or testimonials that can be shared on your website or social media pages.
Set Aside Enough Time
While doing the work of a credit repair professional may not take a substantial amount of time each month for each customer, the onboarding process can be somewhat time-consuming in the beginning. You’ll want to ensure you have enough time to spare for creating trusting relationships with potential and current customers, above and beyond the work you do in removing inaccuracies or errors from their credit reports. Some credit repair businesses automate some of the processes at the start to ease the time burden. However, taking the time to create meaningful relationships is a must in the industry.
Don’t Over Promise and Under Deliver
This goes with any business, whether it is full or part-time. Promising changes to someone’s credit repair that aren’t realistic will result in losing a customer and tarnishing your reputation. Be honest about what is feasible with credit repair services, the time it takes to get items removed, and the reality that not all credit report entries can be resolved through credit repair.
Consult an Attorney
When starting a credit repair contract, one of the main steps to follow is complying with state and federal regulations. Under CROA, credit repair professionals must have a contract for customers to sign that lays out what services are provided, for what cost, and for what timeframe. Sidestepping a contract will put your side hustle at risk of not being in compliance with the law, and it makes it challenging to collect from customers who failed to pay for the services they received.
Taking these small but essential steps goes a long way in creating a side hustle in credit repair that is both legal and profitable.
