The Credit Repair Business Owner Challenges

Problems facing Credit Repair businesses and how you can deal with them.

According to the Credit Repair Services Market Research Report by Function, the global credit repair service market in 2022 is estimated to be $3746.96 Million. It is expected to grow at a CAGR (Compound Annual Growth Rate) of 13.8%, reaching a whopping $10577.81 Million by 2030. The above numbers are unsurprising, given how the credit repair industry tends to counter the general economy.

Countercyclical Nature of the Credit Repair Industry

During the last decade, the general economy has been experiencing exponential growth. As a result, since 2015, the credit repair industry has shrunk every year, experiencing a -6.4% annual growth, according to IBISWorld’s Credit Repair Services in the US Industry Report.

Now that the global markets are heading toward recession, we will see growth in the credit repair space. With a rise in joblessness and stalled disposable incomes, we will see more households struggling to repay debts. As defaults in loan and credit card repayments go through the roof, people will be straddled with low credit scores that they would want to eliminate. 

This is where the big opportunity for the credit repair business lies, especially in the upcoming months. But are you ready to capitalize on this opportunity? The best way to prepare yourself is to learn about the existing challenges within the industry. If you are well aware of the challenges currently facing credit repair businesses, only then can you prepare for the opportunities coming your way in the future.

Challenges Facing Credit Repair Businesses

Even though the credit repair market has contracted in the last few years, credit repair services are still in demand. Customers depend on these services.

• To make bigger EMI-based purchases such as a home or car;
• To get access to affordable credit;
• And to even better their chances of getting employed.

However, you won’t be able to help consumers with these services if you are not surviving the following challenges.

Readily Available Information

This is where the rubber hits the road for credit repair firms. We live in an era where no one can act as a gatekeeper of information and monopolize it. Knowledge is only a click away. Information that previously reached only a select group of privileged elites is now readily available to all. It is true for the Credit Repair space as well. There are detailed guides explaining the credit repair process available online. Anyone can access and use these guides to sort out their credit affairs. Therefore, there is less need for credit repair businesses.

So does this mean that you are going out of business? No, it only means that you would have to distinguish yourself as a business that does more than remove incorrect negative items from credit reports. If you are a business that is ready to educate your customers on general financial information; if you are helping them consolidate their debts; if you are helping them sort out their specific financial troubles, then you will never go out of business, no matter how challenging the market becomes.

Prevalence of Illegal Practices and Resulting Distrust

One of the principal reasons people are becoming vary of credit repair businesses is because bad-faith players have muddied the waters for everyone else. There are so many fraudulent players who boldly make promises that they know they cannot deliver on. They knowingly exaggerate how much value they can provide to their clients. Some are even worse than that. Some malicious entities target innocent but financially desperate people by luring them with promises of incredible returns. Before they know it, their identity is stolen, and scammers are profiting from it by selling their personal information. The most unfortunate thing about all this is that these malicious actors are taking advantage of some of the most vulnerable people in our society. They are hitting where it hurts the most.

In an environment so fraught with the possibility of fraud, it is obviously making people distrustful of credit repair businesses. So what can you do in this scenario? You can start by spreading awareness among your customers about people acting in bad faith. You can educate your audience about how to weed out bad actors. You could help them identify scammers, issue advisories, and just, in general, spread the message of financial vigilance. It will not only help your audience avoid malicious actors but also work wonders for the credibility and trustworthiness of your business.

High Rate of Chargebacks

This has to be the biggest challenge that credit repair businesses worldwide face daily. Chargeback is essentially the transaction reversal by the customer/cardholder by raising a dispute with the merchant. Customers can reverse the transaction or the purchase they had made of your services after they have resolved their issue or used the service you have provided.

 Even in the case of clients who join with the best of intentions, they feel buyer’s remorse as payments start being charged from their accounts. So if you somehow think your business alone is inundated with chargebacks, rest assured, you are surely not alone. Many credit repair businesses go through the same thing. But why is that? Well, there are two primary reasons for that:

People seeking out credit repair services are usually not financially in the best of circumstances. Often they have completely exhausted their available credit. Therefore, you are dealing with a clientele that is either not so eager to pay you, or even if they are, they just can’t. Hence, the chances of them defaulting are much higher. So, what can you do?

How to Mitigate the Risk of Chargebacks?

There are a few steps you can take to reduce the frequency of fraudulent chargebacks:

• Make sure to use credit repair CRM software with an in-built payment system. Using a custom-made credit repair solution can go a long way in ensuring that your payments are cleared on time. You can set up reminders, so clients get push notifications about their due payments on their walls. If you do not already have a credit repair CRM, then now is the time to hire a credit repair software development team to help you create a customized solution.

• Make sure your services are delivered in a manner that leaves your customers satisfied. Your customers should feel guilty about not paying you after the value you delivered.

• Make the cancellation process as easy as possible. If the customers feel they can easily cancel the service at any time, they will feel more confident in your ability to deliver and will pay you without hiccups.

• Ensure that the invoice you charge the customer is clearly named after your business/company. It will help your customer to recognize who is charging them and what they are being charged for.

• Keep a record of all the invoices to have a case against unfair chargebacks.

• There is a higher chance of customers paying you the due amount if you have held your end of the bargain. Instead of promising the moon, if you set clear expectations around what you can and cannot deliver and when you can deliver it, your clients will have no qualms about paying you.

Conclusion

Despite the above challenges, there is no reason for a credit repair business to be full of doom and gloom. There is plenty to be excited about. Soon, the industry is likely to recover from the negative growth of the past few years. With the recession very much here, there would be more demand for credit repair services. Also, there are several big and small players in the market right now that are making the industry more diverse and vibrant. Lastly, there is a definite tilt towards better security in terms of financial transactions and storage of records. So cheer up! Good times are ahead of you.