As a freelancer, it can seem like there’s an additional layer of obtaining credit due to the nature of your work. Whether you’re a contractor in the construction sector or you’re working in the gig economy, as a person working a non-standard job or an alternative to the standard form of employment for an employer, there are more challenges in your way to do even the simplest of things.
With this in mind, can you do anything to help you get the credit you need and boost your credit score when working as a freelancer?
Separate Business and Pleasure
It’s really important that, as a freelancer, you have a separate business and personal account and don’t combine both aspects of your life and your finances. Creating a separate business entity means that your business liabilities don’t impact your personal ones and vice versa. This separation is crucial for building business credibility, a measure of how trustworthy and reliable your business is perceived to be. It’s easier to build business credit and maintain personal credit when your business is seen as credible.
So you need to declare as either an isle partnership, LLC, or corporation, whatever fits your business better, and establish an entity separate from your business.
Pay Ontime
This is vital for both personal and business payments, but you need to ensure that you are maintaining positive payment schedules for your personal life and your business commitments. This is one of the best ways to build a good credit score and is often overlooked. But demonstrating you’re paying your bills on time, not just your credit or opening a new line of credit, can help support your score and prove you are a trustworthy and reliable borrower.
Set reminders and use technology to pay invoices or bills as soon as you get them to avoid the danger of missing payment deadlines or dates.
Be Selective with Lending
As a freelancer, you may not always have the security of a regular paycheck. Therefore, it’s crucial to be selective when choosing lenders. Applying to lenders who understand and appreciate the somewhat unpredictable nature of freelancing can significantly boost your credit score and make your financial journey smoother. By finding lenders who value your circumstances, such as companies offering financing for independent contractors or freelancers, you can feel empowered and confident in your financial decisions.
Manage your Credit Report
Understanding and regularly checking your credit score is crucial for building credit as a freelancer. By actively managing and monitoring your credit report, you can stay on top of your financial health and make informed decisions. This proactive approach ensures that you are always in charge of your credit journey rather than being caught off guard by any surprises. Much like you wouldn’t want to marathon without checking your progress and being prepared.
If your long-term strategy is building a good credit score as an independent contractor or freelancer, you need to put in the prep work to make sure that you’re ready for the long haul.
You can do this by making periodic checks on your credit reports. Many platforms offer a free annual credit report, so take advantage of these. You need to find any errors or inaccuracies and report them immediately. Do not let inaccurate information remain on your credit file. You want to look for signs of identity theft, for example, an account being opened that you didn’t do personally or charges you didn’t make appear, and you need to track your progress to make sure that any efforts you are putting into building your credit score are paying off and if it’s not find out what is happening.
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