The credit repair industry is booming, with more and more people looking to improve their credit scores every day. This can be a great opportunity for entrepreneurs who are looking to start their own business in this growing field. Here are some statistics that will help you understand the credit repair industry, including how big it is and how many businesses are currently operating within it.
- The credit repair industry is estimated to be worth $3.4 billion annually.
- There are currently over 69,000 credit repair businesses operating in the United States.
- The credit repair industry has remained stable during the past years of economic growth.
- With lowered economic expectations ahead, the credit repair industry is expected to expand significantly in the next five years.
- 16% of Americans currently have credit scores at or under 600.
- Approximately 28% of Americans have subprime credit scores (589- 619).
- The average credit repair client spends between $600 and $1,200 on credit repair services.
- The average American credit repair client has $5,221 in credit card debt.
- The average credit score in the United States is 698.
- The average credit score in the United Kingdom is 759.
Understanding The Credit Repair Business
The credit repair business is relatively simple. Companies help people improve their credit scores by disputing negative items on their credit reports. This can include anything from late payments to collections.
Types of Credit Repair Clients
There are two types of credit repair clients: pre-screened and post-screened.
Pre-screened clients are those who have been approved for a loan or credit card, but are looking to improve their interest rates by first repairing their credit.
Post-screened clients have been denied a loan or credit card and are looking to repair their credit to get approved.
Who Needs Credit Repair?
A few different types of people might need credit repair services.
People with bad credit: People with bad credit often have a hard time getting approved for loans or credit cards. They may also be charged higher interest rates. Credit repair can help these people get approved for loans and credit cards, as well as save money on interest rates.
People with good credit: People with good credit may be looking to improve their credit scores in order to get better interest rates. Credit repair can help these people save money on their loans and credit cards.
People with no credit: People with no credit may have a hard time getting approved for loans or credit cards. Credit repair can help these people get approved for loans and credit cards and start building their credit history.
What Does the Credit Repair Process Involve?
The credit repair process usually involves four steps for credit repair businesses:
- Ordering credit reports: You will need to order a credit report from all three credit reporting agencies: Experian, Equifax, and TransUnion.
- Identifying negative items on the credit report: After receiving the credit reports, you will need to identify any negative items on it. These can include late payments, collections, charge-offs, and more.
- Dispute the negative items: After negative items are identified on a credit report, you will need to dispute them. This can be done by sending a letter to the credit reporting agency.
- Monitor credit scores: After disputing the negative items on a credit report, you will need to monitor their credit scores to see if they improve.
Pay Models
There are a few different models for credit repair businesses:
Monthly membership model: In this model, the credit repair company charges a monthly fee for services. The customer pays the fee, regardless of whether or not the credit repair company is successful in removing negative items from the customer’s credit report.
Pay-per-deletion model: In this model, the credit repair company only charges a fee if it is successful in removing a negative item from the customer’s credit report.
Percentage-of-the-savings model: The credit repair company receives a percentage of any savings their client receives as a result of the credit repair company’s efforts. For example, a credit repair company is able to get $5,000 worth of credit card debt removed for a client. The credit repair company takes a percentage of 20% on that total, leaving the client with $4,000 in savings.
Rules and Regulations
The credit repair industry is heavily regulated by the government. The Federal Trade Commission has strict rules that credit repair companies must follow. This includes avoiding false or misleading claims, not charging upfront fees, and ensuring that customers understand their rights.
The FTC has a number of rules that credit repair companies must follow, including:
- Credit repair companies cannot make false or misleading claims about their services.
- Credit repair companies cannot require customers to pay for their services before they provide any results.
- Credit repair companies must provide customers with a written contract that outlines their rights and responsibilities.
Starting a Credit Repair Service
If you are thinking of starting a credit repair service, there are a few things you should know:
The credit repair industry is highly competitive.
- You will need to invest in marketing and advertising to get your business off the ground.
- You will need to build a strong network of credit reporting agencies, creditors, and collection agencies.
- You will need to have a good understanding of credit scoring models and the credit reporting process.
- You will need to be able to handle customer service inquiries and complaints.
Conclusion
The credit repair industry is a growing field. There are currently over 69,000 credit repair businesses operating in the United States and the industry is expected to grow in the next five years. If you are thinking about starting a credit repair business or are already in the business, understanding the industry can help ensure your success.