Since the recent economic downturn, a large number of Americans have decided to turn to freelance writing as a full-time career. Benefits such as sick time, holiday pay, health insurance and a company car are obviously given up if you choose a freelance career, but they are often outweighed by the ability to control your own income and work the hours you please. One major problem independent contractors may face is the difficulty in receiving and building credit. Without a standard job, it may be a challenge to convince others to lend you money, but there are things you can do to help.
Never Be Late
Whether you are trying to establish a new credit history or even if you are attempting to rebuild damaged credit, you may have a more difficult time if you freelance. Banks and credit card companies generally take a very careful look at anyone who is self-employed. Nevertheless, one positive step you can take is to strive to make all payments on time. Most bills can be paid online, and many payments can be scheduled ahead of time. A late payment will equal a bad credit mark, and that will definitely harm your ability to borrow in the future.
Legitimize Your Job
Many freelancers set up an LLC or a corporation to receive payments from those they contract with. This accomplishes two things:
First, normal business expenses like printer ink, paper, Internet service and even home office rent can be written off as business expenses if the business has been structured properly. If your writing income is $30,000 per year and your expenses like rent, gasoline, supplies, and even lunches amount to $14,000, your corporation or LLC will have a profit of $16,000. Taxes on $16,000 are a lot less than taxes on $30,000, and if you’re smart, you can find other legitimate ways to lessen the tax bite.
Second, in order to get paid by your corporation or LLC, you actually have to write yourself a paycheck. This paycheck, if computer generated, will show that you have a real job. No one has to know that you are self -employed, and credit card companies will seldom need this information. You are simply John Smith, and you work as a writer for XYZ Corporation. Please note that if asked, you should never lie to a lender. If you are attempting to buy a house, for example, you will be required to tell all.
If you have created a real job for yourself, it will also be easier to deal with landlords. Since the foreclosure crisis, landlords do perform more stringent credit checks, and some may frown upon someone who says they are a freelance writer.
Get Another Job
Maybe, for personal reasons, you don’t want to create a corporation or an LLC. Some freelancers get a part-time job to provide the legitimacy they need. Places like UPS often have good part-time jobs that even come with health insurance, and these can give you the paycheck you need to help build a solid credit file.
Go Back to School
There’s nothing like being a student, and there are lots of benefits that come with the student lifestyle. Financial aid is available and federal student loans are still the best deal out there. Not only will your tuition be covered, you’ll most times receive extra money and you’ll be building credit history. Remember, don’t make any late payments!
The lifestyle of a freelance writer can be great. You can choose your jobs, choose your hours and choose how you will be paid. With a little hard work and a good amount of preparation, you’ll also be able to meet any credit challenges you’ll face.