It can be difficult for a “non-traditional” employee to repair a credit score because most lenders prefer the W-2 income. As a freelance writer, getting new credit approved to improve your credit score can be a hassle – but we’ve got a few tips any employee can use.
Break down your credit score to rebuild it
The pandemic has caused many people to self-employment and economy of concerts to cover bills as traditional employment options have shrunk thanks to closures. Being a freelance writer may offer the freedom to work on your own terms, but many traditional lenders may be skeptical about approving a loan because your income may not be seen as a source of W-2 income – a job. provided by an employer.
Repairing Your Credit Score Is Possible When You Work For Yourself. Here are some different tactics you can use as a freelance writer to repair your credit score:
Do you already have bills that you pay every month? Do you have a good repayment history with these accounts? Then, it may be beneficial for you to use a credit reporting service to get these accounts on your credit reports.
Things like video and music streaming services, your electric bill, car insurance, and phone bill could be the way to improve your credit without having to take on new credit. Experian Boost is one such service, and it examines your current bills and attempts to include them in your credit reports so that your timely payments contribute to your credit score. And many are free too! Visit our resource center for more information on services like this.
- Consider a secured credit card
A secure credit card is secured by a deposit that you pay when opening the account. If you are unable to pay off the balance on the card, your deposit covers it so the lender does not lose money. Because you start the account with a deposit, backing up the card with your own money, borrowers with less than perfect credit are more likely to get approved for a secured credit card compared to a credit card. unsecured credit – which is not backed by anything.
Borrowers are recommended to try a credit union for a secured credit card for a better chance of approval, and it helps if you are and have been a member for some time. Getting approved for a secured credit card is usually easier than an unsecured credit card, and this could be how you increase payment history and mix up your credit report with a revolving credit account. .
- Find a co-signer or co-borrower for a new loan
If lenders are worried about your income type and you’re trying to take out a car loan to repair your credit, a co-signer or co-borrower might help increase your chances of getting approved.
A co-signer is someone who lends you their good credit score to help you meet credit score requirements. If you have a non-traditional type of income associated with a bad credit rating, it can be difficult to get approved on your own. A co-signer could help you get approved for a loan and on-time payments improve your credit history.
A co-borrower is someone who adds their own income to yours on the loan application. Co-borrowers are usually spouses or life partners, and they combine their income to get approval for larger vehicle loan amounts. If your independent income prevents you from meeting the income requirements, a co-borrower may be able to help. With a co-borrower, you are both responsible for the loan and you both report it on your credit reports.
- Consider special financing
Special funding is another term for a bad credit auto loan, and subprime lenders are included in this category of vehicle financing. These lenders are registered with dealers and are able to help borrowers with bad credit. They typically require their borrowers to have a minimum gross monthly income (before tax) of around $ 1,500 to $ 2,500.
Not all subprime lenders can approve a loan for borrowers with income of 1099, but many do. To prove that you have enough freelance income to afford a car loan, expect to need about two to three years of tax returns and possibly bank statements.
Subprime auto loans are reported by the credit bureaus. Your timely payments and the car loan can help you build a positive repayment history, add to your credit mix, and prove to credit reporting models that you are ready and able to repay your loans.
Understanding leads to smarter actions!
No matter how you get your money, through an employer or through freelance work, understanding what your credit score is made of is a vital step in fixing it.
There are a few credit scoring models out there, but the most commonly referenced by lenders is the FICO credit scoring model. This is a three-digit number between 300 and 850 depending on the information recorded on your credit reports. The higher your credit score, the better off you are as a borrower.
Here is what the FICO credit score is made up of:
- Payment history – 35%
- Amounts due – 30%
- Length of credit history – 15%
- Credit mix – 10%
- New credit – 10%
Payment history is the most important part your creditworthiness. This is because lenders are generally more concerned with your ability to repay loans on time, consistently. For this reason, the number of on-time payments that you reported on your credit reports has the most weight in determining your credit score. However, your missed and late payments also carry a lot of weight – sometimes more than on-time payments.
One of the best ways to improve your credit score is to pay all of your bills on time, avoid missed and late payments, and have those accounts listed on your credit reports to add meat to the pockets. other categories.
We want to help you find your next car loan
Many new borrowers and bad credit borrowers are turning to vehicle financing as a way to boost their credit history and improve their credit score. If you need a car and need to repair your credit, consult us at Auto Express Credit!
We have established a nationwide network of special finance dealerships to help borrowers find the resources they need to finance their vehicle. To get started, fill out our free auto loan application form and we’ll immediately get to work finding a dealer in your area who is registered with subprime lenders.