Self Employment Credit

Doctor Debt

If you are self employed you know how difficult it can be:
• Paying quarterly taxes
• Paying both sides of Medicare
• Not being eligible for unemployment
• Difficult getting approved for credit cards or a loan

As you may have found, lenders don’t like to take risk these days. Being self employed will set of red flares and keep you from getting a credit card, mortgage, or car loan and the days of a No or Low Document loan is gone. So what can you do to improve your chances of getting approved? Below are some answers that can help, even if you are thinking of starting your own business in the future.

• Keep a part time job if your business does not have at least two years of good financial statements. The part time job will show that you have a steady income that includes your self-employment income. Two years of good financial history means good banking ratios.

• Use a separate address than your home address for your business. This can be difficult in some areas and easy in others. In many cities you can rent day offices by the hour, some of these will even rent their address so that you can receive mail and will be held for you. In this situation they act as a PO Box without the PO Box in your business address. Do not use a PO Box.

• Your company should not have your name in it. Instead of Daron Vchulek’s Photography you should use something like Bainbridge Photography.

• When you set up your company create an LLC and make sure that you check the box that indicates that officers of the LLC will received unemployment benefits. This allows you to be an employee of the company.

• Create a virtual phone system. If you are using a Day Office rental they may have a phone number that they can assign to your business. There are issues using a day office number, when someone researches the number it may come up with the Day Office name or you may want to move and you will not be able to move the phone number. An expensive option is to buy a MagicJack phone number. This provides a separate phone number and voice mail that you can take with you. In some locations MagicJack is not able to provide a local number. In this case you can apply for a Google phone number that is local and port that number to your MagicJack number.

• Make sure that you categorize your business as a successful business type. Instead of a freelance photography you should be a photography studio. Lenders will feel more comfortable lending money to a business type that sounds stable.

• Apply for a credit line while you are doing well. Even if you do not use the credit, it will be in place when you need it. Having at least three trade lines (credit lines) on file will give your potential lender a better picture of your credit. Many…. Most companies will wait until they need to borrow money and at this point your books and banking ratios are not looking as good as they did in the past. Establishing credit before you need it is critical.

• Get a DUNS number (http://www.dnb.com) it is free and it will start establishing a credit worthiness of your business.

by Daron Vchulek - 2/2/2010