Strategies to Overcome Declines in Credit Repair Accounts

Running a credit repair business is a rewarding profession. Your work can make a tangible, positive impact on people’s financial lives.

That being said, there is one massive hurdle that can come between you and your client base…

Merchant accounts and payment processing.

Credit repair businesses are unfortunately in the high-risk category. And high risk means high likelihood of application or account decline.

The good news? There are strategies to combat credit repair merchant account declines. This guide will walk you through each one.

Quick Look at This Guide:

• Why Credit Repair Accounts Get Declined
• The True Cost of Credit Repair Account Declines
• 6 Strategies to Overcome Credit Repair Account Declines
• How to Keep Your Merchant Account in Good Standing

Why Credit Repair Accounts Get Declined

Credit repair businesses are in the “high-risk” category when it comes to banks and payment processors.

Here’s the problem…

Your clients are a bad bet. They have already demonstrated financial mismanagement (hence the need for your services). Banks and payment processors do not look at that as a positive.

Understanding the common reasons credit repair merchant accounts get declined is the first step in the right direction. The vast majority of declines come down to a handful of issues that businesses have direct control over.

The four main reasons for decline are:

• High chargeback potential – Credit repair clients may dispute charges or be difficult to work with
• Regulatory oversight – Industry is subject to strict scrutiny by the FTC and state regulators
• Customer risk – Banks don’t like the risk associated with your customer base
• Reputation issues – Historical bad actors have made processors wary of the entire industry

According to Clearly Payments, around 5-10% of all card-present or card-not-present transactions get declined industry-wide. For high-risk businesses like credit repair, that number is much higher.

The True Cost of Credit Repair Account Declines

Account declines cause problems that translate to lost revenue.

When a payment processor rejects your application, shuts down your account, or charges fees you can’t afford, business grinds to a halt. Revenue stops coming in. Clients are unable to pay for your services. You are unable to fulfill those services.

But what’s the cost?

According to research from PYMNTS, 35% of all credit cardholders will abandon a merchant after the first card decline. For a credit repair business where trust is paramount and clientele is scarce, losing a third of potential clients to card issues is catastrophic.

There is more to this, too.

High-risk merchants see processing fees in the range of 3.5% to 10% of each transaction’s total. Compare that to “standard risk” businesses paying a flat rate of around 3.5% per transaction. The additional cost adds up quickly for credit repair businesses with hundreds or thousands of monthly payments.

6 Strategies to Overcome Credit Repair Account Declines

Enough of the bad news. There is good news, too. These six strategies work.

Strategy 1: Work With a High-Risk Specialist

Don’t apply to PayPal, Stripe, and other brands you know from non-business online shopping.

They are not your friends. The large merchants that service the general public do not want high-risk businesses. They will close accounts with little to no notice.

Partner with high-risk payment processors. Do your research and find processors that specialise in high-risk businesses. These processors will work with credit repair businesses and have existing bank relationships that allow for high-risk operations.

This approach works for three reasons.

• Experience with the industry – Providers that specialise in high-risk know credit repair merchant accounts
• Expert underwriters – Underwriters working for high-risk processors have credit repair experience
• Chargeback mitigation tools – Providers that work with high-risk have chargeback tools specific to the industry

Strategy 2: Build a Rock-Solid Application Package

Weak applications guarantee denial.

Compile these important documents and information prior to applying for a merchant account.

• Business registration, incorporation documents, and licenses
• Three to six months of business bank statements
• Previous processing history
• Detailed business plan outlining the nature of the business and offered services
• Chargeback policies and procedures

The more prepared your application looks, the better your chances of acceptance. Underwriters want to see a legitimate, well-organised business.

Strategy 3: Implement Aggressive Chargeback Prevention

Chargebacks are the leading killer of credit repair merchant accounts.

Businesses miss this important point…

Chargeback prevention starts well before the customer signs up with your business. Setting realistic expectations, clear service agreements, and above-and-beyond communication help prevent disputes.

Put these chargeback prevention strategies in place.

• Fraud detection software and services
• Chargeback alerts to know about disputes before they impact your account
• Clear billing descriptors so that customers recognise charges
• Simple and accessible refund process for customers to avoid contacting their banks

Strategy 4: Maintain Proper Reserves

High-risk processors will often require rolling reserves.

Rolling reserves are when the processor holds a certain amount of deposited funds as a chargeback buffer. Resist the urge to fight this. Rolling reserves are the cost of doing business in a high-risk industry. It actually helps stabilise the account and engenders trust with the processor.

Rolling reserves will often be between 5% and 15% of monthly processing volume. Plan accordingly.

Strategy 5: Diversify Your Processing

Credit repair businesses should never have only one merchant account in use.

While high-risk processors are a better fit for the industry, don’t just sign up with one provider. Having multiple processors allows for account separation in the event of a problem.

Additionally, having multiple merchant accounts for the business will allow you to:

• Spread chargeback ratios across accounts to help maintain stability
• Experiment with various processors and competitive rates
• Maintain total processing capacity during disputes or freezes

Strategy 6: Document Everything

Keeping detailed records of your business is crucial when disputes or account reviews happen.

Document these important pieces of information.

• Signed customer agreements and contracts
• Delivery of service and associated communication logs
• Refund requests and resolution
• Chargeback responses and final outcomes

Processors see detailed documentation and feel more comfortable doing business with your company.

How to Keep Your Merchant Account in Good Standing

Once you secure that all-important merchant account approval, it’s crucial to maintain good standing.

Monitor your chargeback ratio. Card networks will often trigger an account for review if this metric goes over 1%. Credit repair companies should maintain a significantly lower ratio.

Communicate with your processor. Keep them in the loop if you have major changes in business structure, large volume increases, or when you anticipate potential issues. Proactive communication breeds trust.

Stay compliant. Credit repair businesses are subject to various laws including the Credit Repair Organizations Act. Don’t just risk fines, put your entire merchant account at risk by violating these regulations.

Wrapping Things Up

Credit repair account declines are frustrating and can put your entire business in jeopardy.

Thankfully, with enough research and preparation, credit repair companies can overcome account denials and secure stable payment processing. The key elements to maintaining credit repair accounts are to:

• Partner with high-risk specialist payment processors
• Prepare strong, rock-solid application packages
• Take steps to prevent chargebacks
• Maintain proper reserves and complete documentation

Credit repair professionals help millions of people rebuild their financial lives every year. The right payment processing plan can let your business be part of that important work.

Start applying these six strategies today. Merchant account stability is well worth the effort.