If you’re starting your own business, or taking the leap into the freelance world, there’s a wide range of credit cards on the market.
Have a good credit score and a strong record of making repayments on time? You may be eligible for a low-interest card with a higher credit limit. But, if your credit history’s poor or you’ve struggled financially at some point, you could still be able to get a credit card - even if you’re self-employed.
How to apply for a credit card if you’re self-employed
It’s usually the same as applying for any other credit card, though you might have to provide a few more details.
As the self-employed don’t always get a guaranteed salary, you may need to go through more in-depth proof-of-income and credit history checks. Having savings or a liquid cash reserve could help as it may give a lender more confidence.
The first step would be to check your eligibility by using a free ’soft’ credit search. This should give you an idea of what kind of credit limit and interest rate you could expect, while not affecting your credit score.
If you’re happy with what’s been offered and decide to go ahead with your application, the bank or lender is likely to do a ’hard’ credit check to make sure you’re safe to lend to. This stage can have an impact on your credit score.
The application process with Vanquis is typically:
- Check you're eligible.
- We’ll then review and give an instant decision.
- Complete and submit your application.
Getting a credit card when you’re self-employed
If you’re self-employed, there are a bunch of reasons why a credit card might work for your business.
Some of these include…
Zero percent or low-interest periods
Some credit cards offer an interest-free period. This means you can use the card without interest building up immediately - as long as you meet the card provider’s requirements and don’t go over the credit limit. These periods often have strict terms and conditions, so taking the time to understand your credit could help you make the most of your interest-free window.
Boosting your cash flow
Making an expensive purchase can be tough if you’re self-employed. Especially in an industry with tight margins and little room for error. A credit card could keep things ticking over by providing the funds, then letting you repay it down the line. It’s important to manage your card responsibly though – this’ll avoid the risk of mounting debts or a negative effect on your credit score.
Fraud protection
Paying with a credit card can be less risky than using cash, a personal debit card or business debit card. If you use cash or a debit card, you're the one liable for who you’ve paid. This means mistakes can be costly. Credit cards usually offer an extra layer of fraud protection, with payments checked and verified. This helps keep your money safe by stopping any potentially fraudulent transactions.
Building your credit score
If you use your credit card wisely, you could see your credit score improve over time. You may then be eligible for options with lower interest rates and higher credit limits. Responsible use includes paying on time, always making at least your monthly minimum payment and not exceeding your credit limit.
The info you’ll need when applying
Many credit card applications are now done online. It’s also likely you’ll need to provide the following details.
- Name
- Address
- Date of birth
- Yearly earnings
- Employment status
- Current account info
- Email address / contact number
Things to think about before your application
Here are some things it’s smart to consider if you want to get the best card for your specific business or financial situation.
Interest-free periods
Some cards come with an interest-free period, which can help you slow the build-up of interest when you spend. Shopping around may give you a card that offers a flexible interest-free period, suitable credit limit and manageable interest rate.
Credit limits and interest rates
Picking a credit card with an interest rate and credit limit that ticks your boxes can help you manage your money. However, making too many applications with a ’hard’ credit check can impact your credit score. That’s why we offer a ‘soft’ eligibility checker. It doesn’t affect your credit score but still tells you if you’re likely to be accepted. A soft search will also give you an idea of what interest rate and credit limit to expect.
It’s also a good idea to check for additional fees and charges. The terms and conditions should say if there’s an annual fee, balance transfer charge or processing fee. They should also have the interest rate and any penalty charges for things like missed payments. Knowing these before completing your application could help make sure you’re getting a credit card that’s right for you.
Different cards for different needs
If you’re self-employed and looking to get a handle on your debts, a balance transfer card might be a better bet than a traditional card.
But if you’re looking to build your credit score, or think you might have bad credit that may harm a normal credit card application, a credit builder credit card could be the one for you.
Does inconsistent income affect an application?
It can do, yes. This is because it’s difficult for banks to know exactly what you can repay on a credit card each month.
When you’re self-employed or a business owner, it’s likely the decision will be based on your credit score, as well as things like the amount of savings you have. This should prove you can make the repayments if your income is lower one month.
Next steps if your application is declined
If your credit card application is rejected, it doesn’t necessarily mean that’s the end of it.
There are other options for self-employed people who are looking to access credit. For example, if you have bad credit, lenders may recommend a credit builder credit card at a higher interest rate and lower credit limit.
The Vanquis Credit Builder Credit Card could help boost your credit score. And if it’s managed responsibly, you might be eligible for lower interest rates and higher credit limits in the future. The Vanquis eligibility checker can provide clarity on what type of card you may be accepted for.
Organisations like Experian, ClearScore and Credit Karma all offer a free credit-checking service that could help you boss your finances. Handy money-management apps, like Snoop, may also be worth a look. It’s free to use, too.
How to improve your credit score and get a credit card
Self-employed but have a poor credit score or no previous experience of credit card repayments? If you’re looking to get credit, there are a few things you can do that could improve your score...
- Make sure you have a good track record of paying utility bills.
- Pay any existing credit card bills on time.
- Show evidence of available cash reserves – this’ll show you can handle repayments if needed.
- Check your application for errors as these can make credit checks harder (and sometimes impossible) for credit reference agencies. This may also impact your credit score as the check will still be logged.
- Think about applying for a credit builder credit card as you may have a slightly better chance of being approved. These cards can also help improve your score.
FAQs
Can I get a credit card if I’m self-employed and have bad credit?
Yes, it’s possible. But there are other things a bank may want to look at when reviewing your application.
For example, as well as a standard self-employed credit check, there might be more focus on:
- Income: You may need to have additional proof of funds. This could include backdated tax returns or profit and loss documents.
- Savings: Having some savings can help give lenders the confidence you’re responsible with your finances.
- Business details: You may be asked to supply more info like a company address and evidence you’re operating in the UK.
Are credit card fees tax deductible if you’re self-employed?
Yes - but only if you’re the owner of the registered business. The fees aren’t tax deductible if you’re a self-employed individual.
Can I get a credit card as a sole trader?
Whether you’re an individual, a business owner, a sole trader or are self-employed, anyone can apply for a credit card. Lenders will then do credit checks to see if you’re eligible.
Remember, it’s not guaranteed and you may need to explore other options if you’re rejected.
Do I need to tell my credit card provider if I become self-employed?
If you already have a credit card and you’ve just become self-employed, you don’t necessarily have to tell your provider.
But, you may want to separate credit card spending into personal and business use. This’ll help make sure repayments don’t mount and things don’t get confusing.