Building Credit In The Gig Economy

    Tips on How to Grow Your Credit

    Freelance work is calling to Americans. Now, over 57 million Americans, 35% of U.S. workers, have gotten in on the gig economy game. And 28% of them are going at it full time.

    Freelance work has a lot going for it. The idea of working for yourself, probably doing something you love is appealing. Freelance workers also set their own hours and many of them work from home. 

    However, freelance work comes with a bit more insecurity than working for a company. To fill the gaps, you’ll want to have credit options available for emergencies. To qualify for the best rates, you need to have a good credit score. If you’re operating as a business, you have to keep your business score up as well.

    How do you do that? Check out these great ways to boost both personal and business credit.

    1. Make On-Time Payments

    The number one way to get and keep your credit score in a good place is to make on-time payments. At 35% of your score, on-time payments have the most weight when it comes to calculating your score.

    Late payments will eventually fall off your record — 7 years after the missed payment. So you want to avoid missing payments as much as possible. If you miss a payment on accident, pay it immediately and call your credit card company. If you are usually on time with your payments they may agree not to report the missed payment, they might even refund any late fees they charged.

    2. Decrease Your Credit Utilization Ratio

    The next most important piece of your credit score is the amount of debt you have compared to the amount of credit you have that you’re not using. For example, if you have two credit cards each with a limit of $5,000, you have $10,000 of available credit. If the total amount owed on both cards equals $4,000, you’re using 40% of your available credit.

    This is called the credit utilization ratio and accounts for 30% of your score. Experts recommend that you keep your credit utilization ratio below 30% for a good score. If you want the best possible score, aim to keep it below 10%.

    3. Take Out a Business Credit Card

    The most obvious way to get your credit utilization ratio down is to pay down your debts. However, there’s another method that can be very useful, especially when you don’t have extra money to pay down your debts.

    Take out a business credit card.

    If you’re working on getting your debts down, taking on a new card might seem counterintuitive. However, taking on a new credit card increases your available credit, which automatically decreases your credit utilization ratio.

    If we go back to our earlier example, taking out a business credit card with a limit of $10,000 now gives you an overall limit of $20,000. Now that $4,000 that you owe is only 20% of your available credit.

    This strategy works with any credit card, so why do we say take out a business credit card? Business credit cards tend to offer better rewards and larger signup bonuses than personal credit cards.

    You don’t have to have any employees or a physical location to qualify as a business. The only requirement is that you are earning money without being someone’s employee. You can even sign up with your Social Security number if you don’t have a business ID. It can also be handy to keep your business expenses separate from your personal expenses for tax purposes.

    However, use the card wisely. Avoid carrying a balance if at all possible.

    4. Request Credit Limit Increases

    Though taking out a new card is a great way to increase your available credit, the lender will check your report, which counts as a hard hit on your score. One inquiry won’t affect your score too much, but be prepared to lose a few points. Plus, if you are not approved, the credit hit won’t have been worth it.

    To avoid the hit altogether, request credit limit increases on your current cards instead. If you are generally a good customer and always make your minimum payments on time, it’s likely that your credit card company will agree to raise your limit.

    In addition to boosting your credit, it’s also nice to know you have options. With a higher credit limit, you might not have to take out a loan in an emergency because you can simply use your credit card. Be aware of your interest rate though, as credit card interest rates tend to be higher than loans.

    5. Request Corrections

    Always keep an eye on your credit score. Each of the three main credit-reporting agencies — Experian, TransUnion, and Equifax — allow you to pull your credit score once a year for free. That means you can pull it three times a year for free if you take advantage of each agency’s offer.

    Do it, and check the report carefully for errors. Credit reporting errors might be more common than you think. According to the FTC, 1 in 5 consumers have errors on at least one of their reports.

    The good news is that you can dispute the errors and request corrections for free. It might take a while for the agency to investigate your claim, but you should see it fall off within a few weeks. Depending on the error, this can have a significant impact on your overall score.

    What Good Credit Means for Your Business

    If you ever need to take out a loan, having a good credit score will help out tremendously. With a good credit score, you qualify for lower interest rates, more favorable repayment terms, and even the loan itself. Getting a loan with bad credit is not easy, and it typically tends to be pretty expensive.

    If you work with suppliers for your business, you’ll find that you qualify for better terms with them as well if you have a good business score. Plus, when you want to expand your business, you’ll have easier access to the capital you need to make that happen.

    We know how tough it is to find the time to do all those things that are important.  We hope by using the best Laundry Service in DFW that you will have a few more hours to spend on those things that matter.

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