Credit Building

Can self-employment affect my credit score?

Jan 24, 2023

Self-employment offers a great deal of freedom and flexibility, but it also comes with responsibility and uncertainty. Not only do you constantly need to find your next job, but you’ve got to organise your own taxes. There’s plenty to love about being your own boss, but Loqbox can help you be the boss of your own finances, too.

You have three credit scores, one from each of the three main credit reference agencies – Equifax, Experian, and TransUnion. This numerical score gives you an idea of how creditworthy lenders see you as, whether they’re likely to offer you loans, credit cards or mortgages, and at what sort of interest rates. You can read more about credit scores here. But does being self-employed affect your credit score?

Does being self-employed affect my credit score?

The short answer is no. Being self-employed has no direct effect on your credit score. 

But that’s not the end of the story. Lenders look at more than your credit history when they decide whether they will offer you credit. They will want to see your monthly income and any assets that could guarantee or cover your loan. Income isn’t shown on your credit report. So how is self-employment viewed by lenders?

Unfortunately, lenders usually consider self-employment to be risky. This is because your income is likely to be more irregular than a salary. Self-employment newbies might struggle to get regular work, whereas more experienced self-employed workers could see large payments one month and nothing the next. Both could have clients that don’t pay invoices on time. All of this creates income instability. And lenders love stability!

Does being self-employed appear on my credit report?

Though your employment status doesn’t feature on your credit report, your borrowing and repayment behaviour (regardless of your employment status) does. It will show if you have defaulted on loans, missed payments or been given any county court judgements (CCJs). It will also show some personal information, such as your name and address. If you’ve made applications for credit in the past, it’s likely that lenders will have asked about your employment. That will then be recorded on your credit report. You can discover the difference between a credit score and a credit report here. 

But regardless of whether your employment status is shown on your credit report or not, when you apply for credit it is very likely that the lenders will ask you to confirm your work and your income. So they’ll probably know if you’re self-employed anyway! The details you give them, along with bank statements for proof of income, will help creditors form a decision about your credit application.

Loans for low credit scores and self-employed people

If you have a low credit score or you’re self-employed and you’re struggling to be accepted for credit, it might be possible to get something called a bad credit loan. That’s a loan with a higher interest rate than usual loans, which will work out to be more expensive to pay back than other forms of loans 

If you’re self-employed, you might have struggled to be accepted for credit in the past. And if you’ve applied for credit several times in a short period, that could have a negative impact your credit score. You can check your credit score for free and without making it drop, using one of our recommended services:

ClearScore (uses Equifax data)*
Credit Club (uses Experian data)
Intuit Credit Karma (uses TransUnion data)

*By the way, clicking on this link and signing up for ClearScore earns us a small commission.

How to improve your credit score if you’re self-employed

If you’re self-employed and have a low credit score,it can feel like a vicious circle. You need credit to show that you can handle credit payments, but you can’t get any credit without proving you can make payments on the credit you don’t have! y If that makes your brain itch, good news: there is a proven way to build your credit score just by using your money in the ways you already use it. Get started with Loqbox! 

You can boost your credit score just by making your Loqbox membership payments with Loqbox Grow. We report your regular payments to the top three CRAs , which helps to build your credit score!

Start building your credit today!

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