How to Improve Your Business Credit Score If You’re Self-Employed

According to the Pew Research Center, nearly 15 million Americans were self-employed in 2016. That amounts to more than 10% of the entire workforce. Those self-employed individuals employed an additional 30 million workers, taking the total number of Americans either self-employed themselves, or working for someone who is, to almost one third of the workforce.

The Pros and Cons of Self-Employment

The benefits of self-employment are obvious to those who choose this route—from escaping the daily 9 to 6 grind to working at their own pace to establishing their own work schedules. Unfortunately, self-employment can be a problem when you’re trying to secure a mortgage loan or obtain a credit card.

Self-employed workers face added scrutiny, primarily because they don’t have a steady paycheck and therefore have a harder time establishing financial stability. With their incomes up one week and down the next, the self-employed are sometimes considered a greater financial risk, which credit agencies sometimes penalize with lower credit scores.
On the other hand, there are millions of self-employed individuals who are able to secure mortgage and other kinds of loans, and to obtain the credit cards they require for their personal and business needs. If you’re self-employed, there are several proactive steps you can take to prove your creditworthiness. Here are 6 strategies which will help you maintain strong credit and obtain a personal or business loan:

1. Save Those Financial Documents

What credit agencies and mortgage lenders want to see is stability—one of the reasons they tend to like steady salaries—but the self-employed can demonstrate financial stability by maintaining complete and accurate records of all financial documents, certainly including all tax returns. If you tend to be a little disorganized yourself, hire a bookkeeper with whom you can set up regular reporting and monthly check-ins.

It’s also a good idea to take the last two years of earnings (lenders generally want to see a minimum of two years worth of financial documentation) and calculate an average monthly income figure. This is something you can show potential lenders to demonstrate stability. Obviously, your financial history will look stronger if you made more money in the months leading up to your credit or mortgage application.

2. Have Financial Reports at the Ready

Financial reports provide the kind of detail lenders appreciate because they help project future earnings. Among those you should maintain and be prepared to show are:

  • Earnings statements: this includes gross revenues from self-employment for the past 1 or 2 years. It typically doesn’t include expenses, refunds or inventory.
  • Expense reports: this includes all business expenses, typically for the past few years. Include big-ticket items like new equipment. Be sure to attach any proofs of purchase and receipts.
  • Profit and loss statement: this combines the data in your earning statements and expense reports, providing lenders a more comprehensive picture of your creditworthiness.
  • A balance sheet: this includes all assets, liabilities and capital investments. This helps lenders get a better sense of your net worth.

3. Make Sure You Have a Strong Credit History

It would be a waste of time to get all your financial documents ready for review, but not to do the things you would normally do to establish good credit, like paying off credit cards on time. Remember that your credit score is calculated along several key factors and may include but isn’t limited to:

  • Your payment history
  • How much you owe
  • The length of your credit history
  • New credit
  • A good mix of credit accounts

You should check your credit score regularly to ensure there are no mistakes and try to keep debt utilization to no more than 30% of your credit limit.

4. Be Prepared to Share Some Strong Referrals

Especially when the decision to lend or not is close, strong referrals can push you over the finish line. Strong referrals who can attest to your financial stability, financial background and character would include former employers and any influential contacts you have. Be sure to continually nurture all of your business networking relationships to maintain a number of key referrals who can reinforce your reputation for honesty and creditworthiness.

5. Be Willing to Pay a Higher Interest Rate

Even when you have all your ducks in a row, some lenders will consider you a higher financial risk simply because you are self-employed, and for this reason offer a loan at a higher interest rate. Obviously, no one want to pay more for a business or personal loan, but doing so can actually be advantageous for the self-employed over the long haul.

For one thing, in exchange for accepting a slightly higher interest rate, you’ll be able to secure the mortgage loan you need, or the business loan financing which will help you grow your business. For another, the loan you take will help you establish a solid payment history to boost your credit rating. Finally, that improved credit rating means you’ll have an opportunity to refinance your loan at a lower rate in the future.

6. Be Aware of What Could Impact Your Credit Score

You should be aware of things that are bad for your credit score and set in place policies and monitor to maintain the best score possible.


Being self-employed does mean that you might have to work a little harder to persuade lenders that you are creditworthy. The good news is that there are proactive measures you can take to substantially increase the odds that lenders will view you as a good risk for both business and personal loans.

Use the same skills which help you succeed in your business to succeed with prospective lenders. Stay organized, do your homework, maintain accurate records, pay your bills on time, and be willing when necessary to make temporary financial accommodations to achieve your long-term financial goals.