Credit cards for the self-employed

If you’re self-employed or run your own business, it may be more difficult to be accepted for a credit card, but it’s still possible to get one. Read our guide to find out what you need to know before you apply.

If you’re self-employed or run your own business, it may be more difficult to be accepted for a credit card, but it’s still possible to get one. Read our guide to find out what you need to know before you apply.

Rob Silvey
Finances expert
4
minute read
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Posted 9 JANUARY 2020 Last Updated 5 APRIL 2022

What are self-employed credit cards?

While there are no specific cards for the self-employed, some credit card providers will accept applications from self-employed people.

However, it can be harder to be accepted for a credit card if you’re a freelancer or run your own business. Without the security of a fixed regular income, you can be seen as a higher risk to a lender. People considered a higher risk also include those with little or no credit history, low income or bad credit history.

While being self-employed or freelance won’t of itself affect your credit score, most lenders aren’t keen on income that isn’t steady or people with poor credit records.

Should I keep my personal and business finances separate?

It might not be possible. You’re personally responsible for your business debts if you’re registered as a sole trader or you’re a member of a partnership, so they will show up on your credit report and can impact your credit score.

However, it’s probably easier to deal with your finances separately when you’re doing your own admin. And you may want to apply for a credit card specifically for business use.

How do I know if I’m eligible for a credit card?

It’s important to understand what the lending criteria are for most providers to ensure you’re eligible for a credit card. If you’re self-employed, many providers will be interested in how steady your income is. While others will be interested in your credit history – how successful you’ve been in paying off previous debt and whether you’ve missed any payments.

To avoid applying for credit cards that you could be declined for, it’s important to use an eligibility checker. This will perform a soft search on your credit file (which won’t be visible to lenders) and will indicate which cards you’re likely to be accepted for. A soft search won’t impact your credit score.

When you compare credit cards with us, we use a soft search to show you the cards you’re likely to be accepted for.

Is it an issue if my self-employed income is variable?

Card providers are typically cautious around borrowers whose income isn’t regular. So even though your total income for a year may be over the required limit set by a provider, the fact that you could have a few lean months might reduce your chances of acceptance.
When considering your application, providers will look at a number of things. This will typically include:

  • Your credit score
  • Your job status
  • How long you have worked in that position
  • Your income.

A card provider will be able to see that you’re self-employed from your application. They’ll be interested to see how much and how regular your income is, to reassure themselves you’ll comfortably be able to afford any monthly card repayments.

Card providers will also consider other factors, such as the level of existing debt you have and whether you’re paying that back every month or missing payments. 

Does it matter that I am new to self-employment when I apply for a credit card?

If you’re new to self-employment you may find it more difficult to be accepted for a card. You won’t have a track record of generating business, so it may be trickier to predict what your income will be. You may also have taken loans to get you started, meaning you’re already carrying debt – making you a less attractive prospect.

If you can wait a little longer and grow your track record, you may find it beneficial. But if you need a card now, then use an eligibility checker to see which cards you’re likely to be accepted for before applying.

What else should I consider before getting a self-employed credit card?

Think about how much debt you have overall and if you’ll be able to pay your credit card bill regularly. Ideally you should pay it off in full every month. If you know this won’t always be possible, think very carefully about choosing a card with a high interest rate – as this could prove very expensive.

Also think about how you’ll use the card so you can apply for the right type for you. Cards may be designed for

What will I need to apply for a credit card if I’m self-employed?

If you’re self-employed, you’ll need to provide additional documents when applying for a credit card. These include:

  • Proof of income: you’ll typically need to show documents that demonstrate a steady income in the past two years. It can be a tax return, a profit and loss statement, or anything else that shows you have regular money coming in.
  • A good credit history: this shows lenders that you can manage debt effectively - by not going over your credit limit and keeping up with your repayments. The better your credit history, the more likely you’ll be approved.
  • Savings: these can support your case by showing that you can manage your money, even if your income fluctuates throughout the year. This demonstrates to lenders that you can keep up with your minimum repayments.

What if my credit card application gets declined?

Rejected applications may have a negative impact on your credit file. Your application might be declined if:

  • Your outstanding credit balance is too high
  • You have an unstable work history
  • Your annual income is too low
  • You have a limited credit history
  • There are late payment charges on your credit file
  • You’ve applied for credit too many times in a short period of time.

Read our guide to what to do if your credit card application has been declined before you try applying elsewhere.

What can I do to improve my chances of being accepted?

Before you consider applying for a card you would do well to check your credit report and correct any errors.

Then take steps to improve your credit score if necessary. For example, register on the electoral roll if you haven’t already done so, and always repay any outstanding debts and household bills on time.

Also avoid applying for multiple cards in a short space of time, as this can look to lenders as if you’re desperate for money and damage your credit score.

Read our guide to building your credit score.

Do I need to tell my credit card provider if I become self-employed?

Probably not. But if you are applying for a new card or to increase your limit you may be asked about your employment status.

Compare the Market Limited acts as a credit broker, not a lender. To apply you must be a UK resident and aged 18 or over. Credit is subject to status and eligibility.

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