Are The Self Employed Less Credit Worthy?
I’ve been self employed for the majority of my working life. Whilst self employment has brought many great benefits, one well known downside to self employment is that it can make it more difficult to obtain credit, at times it can even feel as though lenders take one look at your self employed status and immediately put a big cross next to your name. Are the self employed really less credit worthy or are they just the victim of a huge generalisation?
I’ve Never Missed A Mortgage Payment
If you’re a homeowner the biggest monthly outgoing you’re likely to have is your mortgage payment. In 5 years of home ownership I can proudly say that I never missed a mortgage payment! After recently selling our home we moved into a temporary rental property and we have never missed a rental payment either. I’ve never missed a car finance payment, mobile phone payment and the list goes on. Do I sound like a credit risk to you? Yes my good credit history will improve my ability to get credit but I’m still likely to find it harder than an employed person. Does that sound fair?
The River Has Never Run Dry
I’ll admit there have been times in my self employed life when business has slowed a little but never has the river run completely dry. I’ve always managed to get by and soon things have returned to normal or I’ve found other ways to make some extra money. Can the same be said for employed people? During the past few months thousands of people have lost their jobs in the UK due to retail store and factory closures. When an employed person gets made redundant their income dries up overnight. Yes they will be entitled to some benefits but these will often not be enough to cover the mortgage and other credit payments.
Less Tax, More Benefits, More Money
In a recent post we wrote about how the self employed will often receive more money in tax credits than an employed person might. The self employed also tend to pay less tax because they are able to deduct expenses like motoring costs from their taxable earnings, this is not usually the case for the employed even though they still incur these costs. All this can lead to a self employed person actually having more disposable income in their pocket than someone who is employed.
I believe that most people who are self employed have not just found themselves in that position, they are self employed because they have a natural drive to make money, an entrepreneurial spirit. They also have the confidence needed to get out there and achieve their financial goals. A self employed person will do whatever is required to dig themselves out of any financial hole they might find themselves in. They should also be very good at juggling short term financial strains, should being the key word here.
I’m certainly not saying that the self employed are more credit worthy than the employed or are better at managing their finances, I just think that the self employed deserve a little more credit! (Awful play on words I know)
What do you think? Are the self employed less credit worthy or are they victims of a huge generalisation?