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Easy Credit Score Hacks Self Employed Borrowers Can Leverage

Written by Posted On Friday, 03 May 2019 06:39

Having a high credit score is important for anyone that is trying to secure a mortgage, but it comes into play even more when the potential borrower is self-employed. Home loans for those that are not W2 employees are usually more difficult to qualify for and have higher requirements, such as income verification and minimum credit scores.

There are some things you can do to give your scores a bump, which will put you in a better position when it comes time to apply for a mortgage. With the programs and options for self-employed borrowers always changing it’s a good idea to always focus on maintaining the highest possible credit score at all times. You never know when you will find the perfect home, so be prepared using these tips.

Pay off your balances before the statement cut date each month.

This is something that you can easily do; it just requires a little extra effort to stay on top of it. “It’s always a good idea to avoid racking up credit card debt. When you carry a high debt ratio it can tank your score,” suggests Darryl Howard of Blogger Tips. “So, aside from always avoiding throwing high balances on your cards, try to pay them off each month before the reporting cycle.”

For example, if you pay them off the date after the balance reports to the credit bureaus you might actually have $0 balances, but the reports will reflect otherwise, and that is the info the creditors look at when giving a mortgage approval. Call your credit card companies and find out what date they report and always try to pay them off 3-4 days prior to that to avoid balances being reported.

Get yourself added to aged accounts with high limits and low utilization.

One of the fastest ways to increase your score is by being added to credit card accounts with some age and history. If a family member adds you as an authorized user you will pull over the entire account history onto your profile.

Now, this is only good if the card has a high balance, a lot of age and the person has never missed any payments and never carries a balance. “If there are late payments those will also report on your credit,” says April Gillmore of ClickFirst Marketing. “If they carry a high balance to limit ratio that also will reflect on your credit reports.”

So, while very powerful you want to make sure the accounts you are added to are perfect. They can have a huge impact, but they can also be equally devastating if they are flawed.

Avoid inquiries and look into bumping them if you have a lot.

When you apply for credit cards and loans you get hit with hard inquiries. Not only do these lower your score a few ticks, but they also can result in a mortgage denial. Many banks and lending institutions view a lot of inquiries as a sign of someone seeking a lot of credit at once.

“While you might not have bad intentions, some people scramble to get a lot of credit if they think they are going to be in a bad financial position soon, such as a job layoff,” offers Tad Thomas of Thomas Law Offices. So, a lot of inquiries in a short period of time will sometimes raise red flags and can keep a bank from approving you.

If you do have a lot of inquiries there are ‘bump’ methods you can look into by searching on Google. This involved filling up your profile with ‘soft’ inquiries to bump the ‘hard’ ones of your profile.

Freeze your three credit bureaus reports.

Placing a freeze on your credit report will prevent anyone from accessing your credit without you unlocking the reports, often by giving a PIN code to the bureau when they call you for the authorization.

This is good for identity protection, but it also can help prevent unnecessary credit applications, since it’s quite a hassle to apply for credit. If you have a habit of applying for retail credit cards or special offers with a lot of points, do this.

“When you place a freeze the credit bureaus will have to call you for an authorization code before they release your report to the company performing the inquiry,” says Chris Moberg of Slumber Search. “This will help preserve your score.”

Establish a DUNS number for our business.

You want to establish business credit early, so you can take out big credit lines in your company’s name and not your personal name. This way you don’t have these large debts reporting on your personal credit that you are liable for.

It will be much harder to qualify for a mortgage if you have large credit lines showing on your credit. “If you apply for a DUNS number right away you can establish business credit and then it will be easier to get loans in your company name rather than your personal name,” advises Ignacio Soria of CANN & Co.

It’s free to get a DUNS number and something every business should do in its early stages.

“Many foreign entities will also establish a location is the U.S. to build credit,” says Heinrich Wunder of Merkur. “The company behind the DUNS number is based in the U.S., so companies looking to take advantage of this credit-builder will need a U.S. location.”

Get business credit cards that also report to personal credit.

Now, it was just suggested that you take out credit lines in your company name to avoid all that debt reporting on your personal credit. There are some things that you can leverage to your benefit.

For example, an American Express charge card requires that you pay it off every month, so you are never carrying a balance. “If your business card has age make sure that it’s reporting on your personal credit also,” suggests Pedro Del Nero of Vaporizer Vendor. “Additionally, if you have a personal American Express card, add a business one.” It will use the same age as your personal card and give you another aged account reporting on your credit with positive history.

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James Stevenson

Hi, My name is James and I've been involved in the property and real estate industry for 10 years now. I hope people will like to read about my thoughts and experiences in the industry and please contact me if you want to discuss my articles further!

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