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Self-Employed? 6 Important Ways your Credit Score Affects You • Lenny Credit
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Self-Employed? 6 Important Ways your Credit Score Affects You

How Credit Score Affects the Self-Employed

12 Sep Self-Employed? 6 Important Ways your Credit Score Affects You

Working for yourself definitely has its perks. You have an amazing amount of flexibility as a freelancer, even being able to accept and reject jobs to suit your financial and professional goals. Choice of location -- or length of your workday -- may also be completely up to you in some situations. But before you go thinking that the increased freedom means you can play fast and loose with your credit, think again. It’s actually more important than ever to keep your finances in order when you’re the boss.

Initial Funding Can Be High at First

There are plenty of books out there claiming you can build a booming business with just a couple of bucks and determination. For most freelancers, however, the start-up costs can run a bit higher. Unless you have a good amount of cash stashed aside going into your venture, you’ll probably find that your cash flow coming in will take a bit of time to establish.

Most freelancers admit to having to borrow or use credit to get their businesses off the ground. An excellent credit score ensures you don’t pay more than you have to for the privilege.

Business Goods and Services Require Credit

Whether you are a freelance photographer, writer, programmer, or bill collector, you’ll likely need at least one service purchased to pursue your niche. Even the meager cost of a professional email domain will usually be paid for with a credit or debit card.

Most online business services these days do not take cash; those with a subscription or month-to-month plans also give big discounts if you can pay for a full year in advance! Establish a good credit history, and you’ll find the cost of keeping your business running will be lean – leaving more profit for yourself!

Travel Now and Get Perks for Later

The better your credit score is, the more great business perks you’ll qualify for. Traveling to a business conference this winter? Snag a card with a great rate and bonus airline miles if you have a stellar score.

Hoping to get an upgrade on your 3-day hotel stay for a client meeting? Good credit stewards can ask for this – and more – when they show their loyalty credit card at check in. If you’re using credit wisely for your business, you can expect to be rewarded for all your travel and supply purchases.

Keep Opportunities Open

Did you know that you can’t even work in some industries with bad credit? These jobs require you to keep your history clean – even if you work under a freelance or contractor arrangement. If you’re fairly confident that a bad credit score won’t be relevant in your chosen industry, it’s best to always have the flexibility to say “yes” to the right job.

Cleaning up your score will open up more opportunities and keep you competitive throughout your self-employed years.

Also Read: 7 Jobs that Require Excellent Credit

Insure Against the Worst

Many freelancers must take out additional insurance policies beyond their personal home, car, or liability plans to account for any damages they incur as business professionals. A writer, for example, may take out an additional “Errors and Omissions” policy; someone driving a food truck would need to bulk up their auto insurance to cover business uses and the value of their equipment.

Since the cost of insurance can be directly tied to your credit score, it makes good business sense to take care of your credit profile. Savings on insurance equals more money back to your bottom line.

Keep Your Cash Flow Positive

For most business models, it can be 90 to 120 days before your clients pay their bills from the time services are delivered. This means that you can be putting out cash for the cost of doing business for up to 4 months before ever seeing a return!

If your business is in a high-cost industry, you may find that a line of business credit is essential to keeping your trade running and your customers happy. This is just another of the many reasons to keep your credit in tip-top shape!


It takes guts and determination to turn in a spot at your employer’s office for the key to your own freelance career. Since it’s impossible to know every twist and turn that can happen in the course of a self-employed person’s day, being prepared for anything isn’t just wise – it’s essential. Having a squeaky-clean credit score doesn’t just make the day-to-day jobs of your company easier, it can actually keep your overhead costs low and your bottom line healthy.

About the Author

Linsey Kneri - Finance Writer for Lenny Credit Inc. and 1099mom

Linsey is a freelance blogger, author and public speaker with a passion for helping everyday families earn more and live better. She shares her expertise for Millennial parents who want to start budget-friendly businesses from home at 1099Mom.com.

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