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Credit cards for the self-employed 

Can I get a credit card if I am self-employed? 

Victoria Russell
Written by  Victoria Russell
5 min read
Updated: 26 Jan 2023

When applying for a credit card, you will have to provide details of your salary. This might be a bit trickier to do when you’re self-employed and your earnings fluctuate.

Being self-employed in the UK is synonymous with being your own boss. You could be a sole trader, selling goods and services, or running your own limited company. Regardless of whether HMRC has been informed, your status as a self-employed individual means you are essentially running a business.

Credit card eligibility challenges

For the self-employed, obtaining a credit card is certainly possible, but it's not without its hurdles. Lenders often perceive self-employed individuals as higher-risk borrowers due to potentially unstable income streams, which can make the approval process more stringent compared to traditionally employed applicants.

Credit card resting

Preparing for your credit card application

Before diving into a credit card application, self-employed individuals should consider several factors:

  • Fluctuating finances: Lenders scrutinize your income consistency and ability to make regular repayments.

  • New to self-employment: Without a solid business history, predicting income becomes challenging for both you and the lender.

  • Debt: It is normal for businesspeople to take out loans when starting out, however, this means you’ll have money you’re in the process of paying back. Because you’re already borrowing money from someone else this can also make the lender more worried about if you can keep up with repayments.

  • Credit score: A robust credit score is beneficial for credit card approval. However, there are specialist options for those with less-than-ideal credit histories.

Documentation required for self-employed applicants

When you apply for any credit card, you’ll need to provide proof of identity, address and income. You’ll still need to supply these details for your self-employed credit card, alongside these additional documents:

  • Proof of income: Tax returns or profit and loss statements from the past two years are crucial.

  • Savings: Savings can reassure lenders of your financial management capabilities.

  • Business details: Information like your Companies' House number and proof of UK-based operations may be required.

Credit card options for the self-employed

There are many different types of credit cards available and being self-employed by itself shouldn’t be a barrier to getting one. However, your credit score and income will play a part in you being accepted.

  • For those with lower credit scores: A credit builder card might be the best route, albeit with higher interest rates and lower limits.

Selecting the right card for your needs

The ideal credit card for a self-employed individual depends on their specific financial situation and goals:

  • Debt consolidation: A balance transfer card can be advantageous for managing existing debts, but be mindful of fees and the rate increase after the introductory period.

  • Regular spending: Rewards credit cards offer benefits like cashback and airmiles, but they require disciplined financial management.

Credit solutions for start-up ventures

Start-up businesses can access credit cards, though the absence of a trading history may increase the perceived risk for lenders, potentially affecting the terms offered.

Building a strong credit profile

Improving your credit score is achievable through consistent financial practices:

  • Electoral roll registration: This simple step can enhance your credit score.

  • Timely payments: Keeping up with bill payments is a testament to your financial reliability.

  • Account management: Closing old accounts can positively impact your credit rating.

  • Educational resources: Our guide on how to improve your credit score offers comprehensive advice.

The impact of missed payments

You should always strive to make the minimum credit card payment. However, missing a credit card payment can have serious repercussions, including additional fees, increased interest rates, and long-term credit report damage.

The pros and cons of credit cards for the self-employed

Credit cards can be a powerful tool for the self-employed, offering benefits such as the ability to spread costs and protect your purchases. They can also help boost your credit score. However, they may not be suitable for everyone, especially those who struggle with disciplined repayments.

Exploring alternatives

For those wary of credit cards, alternatives like loans and overdrafts offer different advantages and risks.

Other useful guides

If you want to learn more about credit cards, MoneySuperMarket has a range of guides you can read:

Credit cards for unemployed

Business credit cards guide

Can I get a credit card guide

Compare credit cards with MoneySuperMarket

Our comparison tool helps you find the right credit card based on various factors. Remember, we are a credit broker, not a lender, and our service comes at no cost to you.

Understanding credit cards as a self-employed individual in the UK can be complex, but with the right information and tools at your disposal, you can make informed decisions that bolster your financial stability and contribute to your business's success. Whether you're looking to build credit, manage debt, or reap rewards, there's a credit card option tailored to your unique circumstances. Remember to manage your finances wisely, maintain a good credit score, and consider all available options to ensure your credit choices align with your long-term business goals.

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