September 30th, 2013

How to Build Credit as a Self-Employed Freelancer


How to Build Credit as a Self-Employed Freelancer

**Today’s guest post is contributed by Carrie.**


Being your own boss has some great benefits, with one of the main ones being the freedom and flexibility to do with your time as you please. However, with that freedom comes a big obstacle — it’s difficult to build credit.

This is something I discovered after I quit my job in May 2013 and had to rely on my own income for stability, paying the bills, and of course, building credit.

Thankfully, you can still build credit as a self-employed freelancer by using these five unconventional strategies.

1. Collect proof to verify self-employment income

One of the main reasons it’s hard to obtain a credit card or loan as a freelancer is because it’s not easy to verify your income. It’s not like the financial institution can pull records of your W-2’s, because self-employment income is a lot more inconsistent.

However, if you’ve been freelancing for more than a year, you can use your past tax returns as a way to verify your annual income.

Another way to collect proof of self-employment income is to gather any bank statements and investment or savings account balances. If your business is doing well, or if you’re a smart saver, having a good chunk of money lying around can be used as collateral, and prove that you’re a solid candidate for loaning money to.

2. Authenticate your business by incorporating

If you’re interested in giving yourself a pay stub like a regular employee, you can incorporate or become an LLC. This will prove you’re serious about your business, and show that you’re running a legitimate business.

You’ll be able to pay yourself as an employee, and it will look as if you’re working for any other type of company to the lenders. Plus you can potentially qualify for certain tax benefits, so incorporating is worth considering.

3. Take out credit in the company’s name

After setting up the legal identity of your business, it’s time to open bank accounts, credit with vendors and even credit cards under the business’ name. Just like personal credit and bank accounts, any financial information you have will be reported to the credit bureaus.

So if you’re trying to establish credit as a self-employed business owner, there are major advantages to opening business credit versus credit under your personal name. You can even take advantage of promotional interest rates to pay for any business expenses. It’s a win-win to help with cash flow and your financial history.

Having no credit is better than having bad credit, so if your business is new you can start from scratch to build a solid credit history.

4. Use unconventional methods

You and WilliamPaid, you can build credit just by paying your rent, utilities, cell phone, insurance and other bills. These services have made it easy (and nearly free) for you to leverage your monthly bills to prove you’re a solid candidate for loans and other financial products.

Using debt to build credit is a thing of the past, so don’t be afraid to buck the trends and find your own methods for proof of income or payment history.

5. Keep your personal credit up-to-date

As a sole-proprietor (even one that’s an LLC), your personal credit history is tied to that of your business and vice-versa. So be sure to keep your report clean, check for errors regularly and pay your bills on time.

Your credit score is made up of five components:

  • Payment history — 35%
  • Amounts owed — 30%
  • How long you’ve had credit — 15%
  • New credit — 10%
  • Mix of credit products — 10%

As long as you keep each those top components in mind, you’ll be able to improve your personal and business credit score with very little issues.

If a loan officer sees you have a solid history of making payments on time and are able to control the amount of debt you owe, they generally will have no problem working with you and your business.

What’s another way you can build credit as a freelancer?


Carrie Smith is the owner and editor of Careful Cents, a blog that specializes in helping serious solopreneurs and full-time freelancers earn more money in less time through systems and financial organization. She also writes for The Huffington Post, AllBusiness Experts and several other business websites. You can find her on Twitter @carefulcents.

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Disclaimer: All information posted to this site was accurate at the time of its initial publication. Efforts have been made to keep the content up to date and accurate. However, Credit Karma does not make any guarantees about the accuracy or completeness of the information provided. For complete details of any products mentioned, visit bank or issuer website.

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September 25th, 2013

Make it Work! How Building Your Credit is Like Being a Contestant on “Project Runway”

Make it Work! How Building Your Credit is Like Being a Contestant on Project Runway th

One of my favorite shows on TV right now is Project Runway, a reality competition where fashion designers fight for the top prize. I’m in no way a fashionista, but it’s really amazing to see what the contestants can produce within a mere 1-2 days. It’s probably hard to imagine that a silly reality TV show has anything to do with finances, but where there’s a will, there’s a way… to make it work! Sew keep reading for cleverly designed analogies, bad puns and maybe some financial advice.

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July 31st, 2012

How to Save Money While Building Credit

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Building a solid credit history and saving money don’t always go hand in hand. The essence of building credit means you’re paying back borrowed money to establish a good reputation, so you can borrow more money (at a lower interest rate) in the future.

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January 31st, 2012

My Credit Is Terrible. Now What?

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It may be difficult to rebuild rock-bottom credit, but it’s not impossible. We constantly hear of Credit Karma members boosting their scores after several months of belt-tightening and smart credit moves, so if they can do it, so can you!

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September 9th, 2011

Credit Karma Answers: How do I build credit to buy a house?

Ready to take the plunge into becoming a homeowner? Make sure your credit is in tip-top shape first! Check out these tips, from our Credit Advisor, Justine Rivero.

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September 13th, 2010

The College Student’s Nitty Gritty Guide To Building Good Credit

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Pass on this quick & dirty guide to building good credit to your college-bound friends and family, whether it’s they are freshman year or seniors, so they can discover the right financial attitude while also soul-searching in college.

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August 24th, 2010

This Week’s Top Credit Questions – Confused About Credit


Sometimes there are disagreements amongst Credit Karma consumers about how to handle certain situations—to close or not to close a credit card, to pay off this or that, and more. One thing is for sure—we’re proud Credit Karma consumers have something to say about it.

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July 2nd, 2010

Celebrate Your Financial Independence! Your Credit Score Will Get You There

As we celebrate America’s Independence Day, why not start working on your own financial independence by better managing your credit score. In working towards financial independence, your credit score is a crucial initial step to better financial health, as well as something that stays with you throughout your entire life. Since credit scores are calculated […]

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January 19th, 2010

Dear Credit Karma – Credit Report & Credit History

Dear Credit Karma, I have no credit. How do I start to build my credit if no one will approve me for a line of credit? The best route for first-time credit users to build credit is with a secured credit card. Secured credit cards are similar to credit cards except they require a security […]

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