Applying and getting approved for credit from lenders is not easy for many people. For freelancers, this process can be even harder as freelancing doesn’t always mean that you will get a steady stream of income each month.
Your credit score depends on a number of factors like your payment and credit history. In order to be eligible for a credit product, like a personal loan, not all hope is lost if you are a freelancer. If you don’t have a steady income, this blog post is right for you. Read on to learn the 3 steps that you can take to improve your credit score.
Your credit score – how does it work?
Before a lender offers you a loan, they will check your credit score. This is usually done by a credit bureau and they are responsible for checking your financial status and thefactors that impact your credit score. The takeaway from this is that the better your credit score, the higher your chances are of getting a loan.
Credit bureaus not only check if you have taken out anyloansbefore but also look into your payment history to determine if you are trustworthy enough to pay back any loans you take out in future. If you are a freelancer and want to get a loan, two important factors that will determine whether you will get a loan or not are:
- If you have little or no credit history (looking at the credit products you’ve taken out before).
- Your payment history (looking at your ability to repay a credit product on time).
With this in mind, here are the steps you can take to improve your credit score:
1. Cancel unnecessary accounts and cards
As a freelancer, it isn’t uncommon to have a few sources of income. Try and have these income sources deposited into one bank account. This makes it easier to track your payment history. When bureau checks are being done on your bank account, how much you earn will also get looked into as a way to see if you receive a regular income. As a freelancer, you want to have this done on one bank account so you can better prove your income to lenders.
If you have several accounts or credit cards, you might want to reevaluate which ones are worth keeping and which ones you should cancel. Lenders pay close attention to your credit history, and if you want to improve your credit score, get rid of any unnecessary accounts and cards.
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2. Sign up for your credit report
If you don’t know where you stand with your credit score, you won’t know how to take action to improve it. That’s why it’s important to sign up for your credit report with our partner,ClearScore. It’s a free service that gives you a snapshot of your financial history, credit score, and tips on how you can improve your score.
Use the monthly reports that ClearScore sends you to monitor your credit score and look for opportunities on where you can improve, correct any mistakes on your credit report, and see if there has been any fraudulent activity in your name.
3. Pay your bills on time
Your payment history is one of the most important factors when it comes to your credit score. That means if you want to improve your credit score, you need to pay your bills on time.
Creating a budgetis a helpful way of ensuring that you have enough money to make payments on time but you also need to make sure you know when your bills are due. A tip is to set up automatic payments for your bills so that you will never miss a payment.
Improving your credit score as a freelancer can be a bit of a challenge, but it isn’t impossible and it’s one that can be overcome in a responsible manner.
Use the steps in this blog post to give you a good start and soon, you will have a healthy credit score that allows you to take out credit as easily as any employee.
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