{"id":7043,"date":"2016-12-02T13:27:16","date_gmt":"2016-12-02T21:27:16","guid":{"rendered":"https:\/\/www.bidsketch.com\/blog\/?p=7043"},"modified":"2020-08-18T17:39:21","modified_gmt":"2020-08-19T00:39:21","slug":"self-employed-credit","status":"publish","type":"post","link":"https:\/\/www.bidsketch.com\/blog\/business\/self-employed-credit\/","title":{"rendered":"How to Avoid Credit Problems When Self-Employed"},"content":{"rendered":"

\"ABuilding up\u00a0a good credit rating when self-employed isn\u2019t the easiest of tasks \u2013 by definition, self-employment isn’t perceived\u00a0as secure as regular employment, and work can either be feast or famine (though there are some good ways<\/a> to minimize this).<\/p>\n

However, if you\u00a0want to borrow money, you’ll definitely need to make sure you have a good credit rating \u2013 otherwise you could find your business and your day-to-day life hitting serious obstacles.<\/p>\n

So how do credit ratings work, what can you do to make sure yours is good, and how should you actually apply for credit? Let\u2019s have a look below!<\/p>\n

<\/p>\n

How Credit Ratings Work<\/h2>\n

Your credit rating is really important, because banks and other lenders use it to decide whether you\u2019re worth the risk of lending money to. It can even affect whether you’re able to\u00a0rent an apartment<\/a>. The better your rating, the more likely you are to get what you are looking for at a good, low interest rate.<\/p>\n

Your rating translates into a number (your credit score) that is used to rank your\u00a0credit risk. The higher the number, the lower risk you are. While different lenders have their own ways of rating credit scores, 700 and above (on a scale of 300 to 850<\/a>) is generally considered good.<\/p>\n

The US government has a\u00a0handy guide<\/a> to credit reports and scores, and\u00a0Equifax<\/a>,\u00a0Experian<\/a>, and\u00a0TransUnion<\/a> will all provide one free credit report per year\u00a0on request<\/a> (which is\u00a0Federal law). So, if you space them out, you can get a free credit report every four months.<\/p>\n

What Can Cause Red Flags on Your Credit Rating<\/h2>\n

Now we\u2019ve established what a credit rating is, it\u2019s important to understand what affects it, because there are various issues that can seriously impact your credit score.<\/p>\n

Your credit rating is based on a number of variables. Two big ones are your\u00a0payment history<\/a> (i.e. whether you\u2019ve paid your bills on time, or defaulted on previous loans and bills), and the amounts you owe (i.e. whether you are near your credit limit).\u00a0There are also various other factors such as the type of credit or loans you have \u2013 for example,\u00a0bank loans are seen as better<\/a> than high-interest store or catalogue loans.<\/p>\n

Naturally, if you have any court judgments against you, filed for bankruptcy, or suffered any form of insolvency, these issues can have a\u00a0huge impact<\/a>. The length of your credit history is another factor \u2013 if you\u2019ve got a good payment record<\/a> dating back a long time, that\u2019s helpful.<\/p>\n

However, mistakes can creep into ratings. You shouldn\u2019t be impacted by the debt of others, such as a\u00a0parent or brother<\/a>, but it’s worth reiterating that it\u2019s a really good idea to check your credit score regularly.<\/p>\n

How to Create a Positive Credit History<\/h2>\n

The first thing you need to do, as\u00a0Experian wisely counsels<\/a>, is to set yourself a budget and live within it. If you\u2019ve paid your bills (such as rent and electricity) on time for the past two to three years, this will help your credit rating.<\/p>\n

It\u2019s also considered important to have some credit<\/a>\u00a0in order to develop a good credit history. However,\u00a0make sure your balance stays well below your credit limit, and pay your card off each month. Also, don\u2019t apply for several cards at once, because potential lenders might see it as a red flag<\/a> \u2013 each application will leave a ‘footprint’ that affects your credit score.<\/p>\n

One thing that\u2019s important but hard to achieve when self-employed is to demonstrate stability \u2013 i.e.\u00a0you have regular incoming funds and you\u2019re living within your means.<\/p>\n

To get around the irregular income issue, create a ‘rainy day fund’\u00a0when times are good to act as a cushion during quieter months. Also, make sure you always put aside money for your taxes as income arrives, and don\u2019t use it for any other purpose.<\/p>\n

In addition, if you own a house or apartment it\u2019s a bonus (if you are seeking a secured loan<\/a>, it will often be against your property). However, be warned that your home could be at risk if\u00a0you begin defaulting!<\/p>\n

How to Curb Credit Card Spending<\/h2>\n

Yes, it\u2019s all very well saying to use credit, but what about those of you who get the urge to spend\u00a0the moment the credit card\u00a0touches your hand?<\/p>\n

MoneySavingExpert provides some\u00a0cautionary advice<\/a> \u2013 unplanned spending can lead to a debt mountain, and that would have a huge impact not only on yourself, but those around you too. As such, one late payment on a credit card can\u00a0drop your credit score dramatically<\/a>.<\/p>\n

A\u00a0budget planner<\/a> can help you to get a grip on your spending, and let you know what you can afford to spend. A good piece of advice is to ensure your finances lead your lifestyle, rather than the other way round.<\/p>\n

Work out what you can spend on different areas of your life and create little \u2018pots\u2019 \u2013 which can even be separate bank accounts \u2013 including a main account, one for major purchases, and one for bills. You could also open\u00a0a Christmas, birthday, or holiday account, set an annual target sum you want to spend, and divide it into monthly portions that you\u00a0then squirrel\u00a0away.<\/p>\n

Ultimately,\u00a0only put on a credit card what you can\u00a0pay off<\/a> at the end of the month. If you\u2019re really struggling, consider\u00a0debt counselling<\/a> as a way forward.<\/p>\n

How to Apply for Credit<\/h2>\n

One benefit of working on a good credit rating is that when you really need a loan (such as a mortgage), you’re likely to get it. However,\u00a0gaining approval for a loan is never an easy process, and lenders are far stricter nowadays than they used to be when it comes to approving funds.<\/p>\n

Firstly, you should make sure your credit score is good (following the advice we’ve given throughout this piece), then check you have everything you need in terms of\u00a0documentation for the application<\/a> (the form itself will tell you what an individual lender requires).<\/p>\n

Also check the Representative APR carefully. This is the\u00a0interest rate<\/a>\u00a0(including fees), that a lender uses on loans taken out by at least 51% of their customers. Some lenders will be happy to lend you money, but at an outrageous interest rate. Bankrate has a\u00a0loan comparison calculator<\/a> that can help you find the best deal on a mortgage, and interest.com<\/a> looks at a range of different loan rates.<\/p>\n

Finally, providers of large goods (such as cars or furniture) will routinely offer to arrange loans themselves, but the interest rates may be high. The Money Advice Service provides\u00a0useful guidance<\/a> on a range of similar finance options – it’s UK based but still good, practical advice.<\/p>\n

Conclusion<\/h2>\n

Making sure your credit score is decent when you\u2019re self-employed\u00a0isn\u2019t impossible. All you need is to make sure your finances are in good order, and that you work hard on the\u00a0things you can<\/em> control (like your spending habits). You can then make sure that when you do<\/em> come to apply for a loan, everything goes smoothly.<\/p>\n

To recap the basics:<\/p>\n

    \n
  1. Understand what your credit rating is, and how it affects loan interest rates.<\/li>\n
  2. Steer clear of any action that could negatively affect your credit rating.<\/li>\n
  3. Create a positive credit history.<\/li>\n
  4. Curb your credit card spending.<\/li>\n
  5. Check the APR when applying for a loan, and be careful about taking out store credit.<\/li>\n<\/ol>\n

    Have you ever struggled with your credit rating? Tell us about your experiences in the comments section below!<\/p>\n

    Photo credit<\/em>: jPhotoStyle<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

    Building up\u00a0a good credit rating when self-employed isn\u2019t the easiest of tasks \u2013 by definition, self-employment isn’t perceived\u00a0as secure as regular employment, and work can either be feast or famine (though there are some good ways to minimize this). However, if you\u00a0want to borrow money, you’ll definitely need to make sure you have a good […]<\/p>\n","protected":false},"author":37,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[272],"tags":[],"acf":[],"yoast_head":"\nHow to Avoid Credit Problems When Self-Employed<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.bidsketch.com\/blog\/business\/self-employed-credit\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How to Avoid Credit Problems When Self-Employed\" \/>\n<meta property=\"og:description\" content=\"Building up\u00a0a good credit rating when self-employed isn\u2019t the easiest of tasks \u2013 by definition, self-employment isn’t perceived\u00a0as secure as regular employment, and work can either be feast or famine (though there are some good ways to minimize this). However, if you\u00a0want to borrow money, you’ll definitely need to make sure you have a good […]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.bidsketch.com\/blog\/business\/self-employed-credit\/\" \/>\n<meta property=\"og:site_name\" content=\"Bidsketch\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/bidsketch\" \/>\n<meta property=\"article:published_time\" content=\"2016-12-02T21:27:16+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2020-08-19T00:39:21+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.bidsketch.com\/blog\/wp-content\/uploads\/2016\/10\/Blog-bid-credit-cards.jpg\" \/>\n<meta name=\"author\" content=\"Lis\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@Bidsketch\" \/>\n<meta name=\"twitter:site\" content=\"@Bidsketch\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Lis\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"6 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.bidsketch.com\/blog\/business\/self-employed-credit\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.bidsketch.com\/blog\/business\/self-employed-credit\/\"},\"author\":{\"name\":\"Lis\",\"@id\":\"https:\/\/www.bidsketch.com\/blog\/#\/schema\/person\/32712546fd8c38a66c46a3943d1174d2\"},\"headline\":\"How to Avoid Credit Problems When Self-Employed\",\"datePublished\":\"2016-12-02T21:27:16+00:00\",\"dateModified\":\"2020-08-19T00:39:21+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.bidsketch.com\/blog\/business\/self-employed-credit\/\"},\"wordCount\":1282,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/www.bidsketch.com\/blog\/#organization\"},\"articleSection\":[\"Business\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.bidsketch.com\/blog\/business\/self-employed-credit\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.bidsketch.com\/blog\/business\/self-employed-credit\/\",\"url\":\"https:\/\/www.bidsketch.com\/blog\/business\/self-employed-credit\/\",\"name\":\"How to Avoid Credit Problems When Self-Employed\",\"isPartOf\":{\"@id\":\"https:\/\/www.bidsketch.com\/blog\/#website\"},\"datePublished\":\"2016-12-02T21:27:16+00:00\",\"dateModified\":\"2020-08-19T00:39:21+00:00\",\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.bidsketch.com\/blog\/business\/self-employed-credit\/\"]}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.bidsketch.com\/blog\/#website\",\"url\":\"https:\/\/www.bidsketch.com\/blog\/\",\"name\":\"Bidsketch\",\"description\":\"Bidsketch \u2013 Business Proposal Tips for Agencies, Consultants, and Freelancers\",\"publisher\":{\"@id\":\"https:\/\/www.bidsketch.com\/blog\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.bidsketch.com\/blog\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\/\/www.bidsketch.com\/blog\/#organization\",\"name\":\"Bidsketch\",\"url\":\"https:\/\/www.bidsketch.com\/blog\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.bidsketch.com\/blog\/#\/schema\/logo\/image\/\",\"url\":\"https:\/\/www.bidsketch.com\/blog\/wp-content\/uploads\/2014\/07\/Bidsketch-logo-large.png\",\"contentUrl\":\"https:\/\/www.bidsketch.com\/blog\/wp-content\/uploads\/2014\/07\/Bidsketch-logo-large.png\",\"width\":1856,\"height\":415,\"caption\":\"Bidsketch\"},\"image\":{\"@id\":\"https:\/\/www.bidsketch.com\/blog\/#\/schema\/logo\/image\/\"},\"sameAs\":[\"https:\/\/www.facebook.com\/bidsketch\",\"https:\/\/twitter.com\/Bidsketch\"]},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.bidsketch.com\/blog\/#\/schema\/person\/32712546fd8c38a66c46a3943d1174d2\",\"name\":\"Lis\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.bidsketch.com\/blog\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/494ed4be6b6ba83bdc0aafd4958d5f45?s=96&d=mm&r=pg\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/494ed4be6b6ba83bdc0aafd4958d5f45?s=96&d=mm&r=pg\",\"caption\":\"Lis\"},\"description\":\"Lis is part of the WordCandy writing team. She has clocked some serious mileage as a freelancer over the years, and loves sharing her expertise here on the Bidsketch blog.\",\"sameAs\":[\"http:\/\/wordcandy.co\/\"]}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"How to Avoid Credit Problems When Self-Employed","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.bidsketch.com\/blog\/business\/self-employed-credit\/","og_locale":"en_US","og_type":"article","og_title":"How to Avoid Credit Problems When Self-Employed","og_description":"Building up\u00a0a good credit rating when self-employed isn\u2019t the easiest of tasks \u2013 by definition, self-employment isn’t perceived\u00a0as secure as regular employment, and work can either be feast or famine (though there are some good ways to minimize this). However, if you\u00a0want to borrow money, you’ll definitely need to make sure you have a good […]","og_url":"https:\/\/www.bidsketch.com\/blog\/business\/self-employed-credit\/","og_site_name":"Bidsketch","article_publisher":"https:\/\/www.facebook.com\/bidsketch","article_published_time":"2016-12-02T21:27:16+00:00","article_modified_time":"2020-08-19T00:39:21+00:00","og_image":[{"url":"https:\/\/www.bidsketch.com\/blog\/wp-content\/uploads\/2016\/10\/Blog-bid-credit-cards.jpg"}],"author":"Lis","twitter_card":"summary_large_image","twitter_creator":"@Bidsketch","twitter_site":"@Bidsketch","twitter_misc":{"Written by":"Lis","Est. reading time":"6 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/www.bidsketch.com\/blog\/business\/self-employed-credit\/#article","isPartOf":{"@id":"https:\/\/www.bidsketch.com\/blog\/business\/self-employed-credit\/"},"author":{"name":"Lis","@id":"https:\/\/www.bidsketch.com\/blog\/#\/schema\/person\/32712546fd8c38a66c46a3943d1174d2"},"headline":"How to Avoid Credit Problems When Self-Employed","datePublished":"2016-12-02T21:27:16+00:00","dateModified":"2020-08-19T00:39:21+00:00","mainEntityOfPage":{"@id":"https:\/\/www.bidsketch.com\/blog\/business\/self-employed-credit\/"},"wordCount":1282,"commentCount":0,"publisher":{"@id":"https:\/\/www.bidsketch.com\/blog\/#organization"},"articleSection":["Business"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/www.bidsketch.com\/blog\/business\/self-employed-credit\/#respond"]}]},{"@type":"WebPage","@id":"https:\/\/www.bidsketch.com\/blog\/business\/self-employed-credit\/","url":"https:\/\/www.bidsketch.com\/blog\/business\/self-employed-credit\/","name":"How to Avoid Credit Problems When Self-Employed","isPartOf":{"@id":"https:\/\/www.bidsketch.com\/blog\/#website"},"datePublished":"2016-12-02T21:27:16+00:00","dateModified":"2020-08-19T00:39:21+00:00","inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.bidsketch.com\/blog\/business\/self-employed-credit\/"]}]},{"@type":"WebSite","@id":"https:\/\/www.bidsketch.com\/blog\/#website","url":"https:\/\/www.bidsketch.com\/blog\/","name":"Bidsketch","description":"Bidsketch \u2013 Business Proposal Tips for Agencies, Consultants, and Freelancers","publisher":{"@id":"https:\/\/www.bidsketch.com\/blog\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.bidsketch.com\/blog\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/www.bidsketch.com\/blog\/#organization","name":"Bidsketch","url":"https:\/\/www.bidsketch.com\/blog\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.bidsketch.com\/blog\/#\/schema\/logo\/image\/","url":"https:\/\/www.bidsketch.com\/blog\/wp-content\/uploads\/2014\/07\/Bidsketch-logo-large.png","contentUrl":"https:\/\/www.bidsketch.com\/blog\/wp-content\/uploads\/2014\/07\/Bidsketch-logo-large.png","width":1856,"height":415,"caption":"Bidsketch"},"image":{"@id":"https:\/\/www.bidsketch.com\/blog\/#\/schema\/logo\/image\/"},"sameAs":["https:\/\/www.facebook.com\/bidsketch","https:\/\/twitter.com\/Bidsketch"]},{"@type":"Person","@id":"https:\/\/www.bidsketch.com\/blog\/#\/schema\/person\/32712546fd8c38a66c46a3943d1174d2","name":"Lis","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.bidsketch.com\/blog\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/494ed4be6b6ba83bdc0aafd4958d5f45?s=96&d=mm&r=pg","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/494ed4be6b6ba83bdc0aafd4958d5f45?s=96&d=mm&r=pg","caption":"Lis"},"description":"Lis is part of the WordCandy writing team. She has clocked some serious mileage as a freelancer over the years, and loves sharing her expertise here on the Bidsketch blog.","sameAs":["http:\/\/wordcandy.co\/"]}]}},"_links":{"self":[{"href":"https:\/\/www.bidsketch.com\/blog\/wp-json\/wp\/v2\/posts\/7043"}],"collection":[{"href":"https:\/\/www.bidsketch.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bidsketch.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bidsketch.com\/blog\/wp-json\/wp\/v2\/users\/37"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bidsketch.com\/blog\/wp-json\/wp\/v2\/comments?post=7043"}],"version-history":[{"count":8,"href":"https:\/\/www.bidsketch.com\/blog\/wp-json\/wp\/v2\/posts\/7043\/revisions"}],"predecessor-version":[{"id":9599,"href":"https:\/\/www.bidsketch.com\/blog\/wp-json\/wp\/v2\/posts\/7043\/revisions\/9599"}],"wp:attachment":[{"href":"https:\/\/www.bidsketch.com\/blog\/wp-json\/wp\/v2\/media?parent=7043"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bidsketch.com\/blog\/wp-json\/wp\/v2\/categories?post=7043"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bidsketch.com\/blog\/wp-json\/wp\/v2\/tags?post=7043"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}