Does Poor Personal Credit Impact Those Working From Home?

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Is your credit score important as a freelancer? The answer to that question is a resounding yes! Considering the average credit score lenders require for good deals on loans is around the 700 mark, it’s important for those working from home to keep their scores high.

However, the transition from a fixed salary to a freelance income can wreak havoc on your credit rating and not necessarily for the reasons you think. Before sitting back and relaxing on your credit score, consider the various things it may affect. Keeping up your credit score is not only important but simple when you know how.

Access to High Limits

Have you ever selected the option that allows credit card institutions to increase your limits according to your spending habits and repayments? It turns out those automatic increases aren’t always in favor of the consumer.

The reason for this is twofold: the first is that high limits can be seen as higher risk by the ratings agencies. The second is that using those high limits also places users in a higher risk category – using a higher percentage of available credit is a surefire way to bring a credit score down. For a work-from-home freelancer, the temptation to use up those limits during the slower months may have an effect on the credit rating. A drop in the score can then reduce the availability of further debt.

The Right Information At the Wrong Time

Freelancers who aren’t proactive about monitoring their credit scores can end up out of the loop in terms of how they’re seen by financial institutions. This often means only finding out about derogatory information when it’s already too late, such when the credit is needed. A way to avoid this is to check credit scores by using services and apps that won’t affect the credit rating. Some banks also offer this service to their clients.

Other Services That May Be Affected

Increasing your credit rating will not only be a boon for future loan applications, but also other services that may require a clear record. These include phone accounts, rental contracts, and even some insurances. The best route to follow is to always try to keep your credit score over the 700-mark in order to benefit from good rates and packages.

It may feel like it’s just more admin to take care of, but those who maintain their credit scores reap the rewards. Even freelancers who have no intention of applying for loans will benefit from a good credit score. Freelancers never know when they might need to apply for a new phone contract or find a new place to live.

One downside of freelancing, especially in the early days, is that it’s far harder for banks to assess how credit-worthy you are when income is less consistent than one fixed monthly pay check. It’s a tad depressing that this can make it harder to obtain loans and mortgages. As such, keeping a consistent eye on your credit rating is well worthwhile.

(Scores referred to above refer the the US marketplace, but credit ratings in the UK and elsewhere work in a similar way).

About Author

Founder of - Ben is a long-established freelancer with a passion for helping other people take control of their destiny and break away from "working for the man." Prone to outbursts of bluntness and realism.

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