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Do you need a license to start a credit repair business?

Updated By ProfitDrawer

Short answer

It depends on your state, and federal rules apply everywhere. The federal Credit Repair Organizations Act bars charging clients before services are performed, requires written contracts, and lets clients cancel within 3 business days. Many states add their own rules, which can include registration or a bond. ProfitDrawer's credit repair business guide suggests contacting your state attorney general's office and having a lawyer review your contract and billing before your first client.

Federal rules (Credit Repair Organizations Act, enforced by the FTC):

  • No untrue or misleading statements when selling credit repair services.
  • No payment demanded before the work is done.
  • Contracts must be in writing, with required disclosures.
  • Clients can cancel without penalty within 3 business days of signing.

What the business cannot do: remove accurate negative information. The FTC says most negative information stays on a report for 7 years and a bankruptcy for 10 years. A legitimate service helps people find and dispute errors, which consumers can also do themselves for free.

State rules: many states have their own credit services laws that can require registration, a bond, extra disclosures or fee limits. Ask your state attorney general or consumer protection office and your secretary of state, and register the business and any local license as you would for any other company.

Build billing around work already completed, and never promise a score increase. General information, not legal advice.

Source: Credit Repair Organizations Act (Federal Trade Commission) · Updated

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General information, not tax, legal or financial advice. Check the rules for your state and your situation.