Let's talk about credit for freelance writers.
Having good credit is important for freelancers because our income is scrutinized a lot harder when we apply for credit cards and loans. Because a freelancer writer’s income is somewhat less predictable and harder to prove than that of a full-time employed worker, we need to have a solid credit history to help get approved for credit card and loans.
What is Credit?
Credit is your reputation for paying your bills on time. Good credit means you’ve borrowed only what you can afford to repay and you’ve paid your bills on time. On the other hand, bad credit means you’ve fallen behind on your payments in the past.
What is a Credit Score?
Your credit is measured by your credit score. Credit scores generally range from 300 to 850 with higher credit scores being better. These days, you need a credit score above 720 to get approved for a credit card or loan, especially as a freelancer.
Your credit score is calculated using five things:
- 35% is how often you’ve paid your bills on time (paying on time is better)
- 30% is how much of your available credit you’re using (less is more)
- 15% is how long you’ve been using credit (longer is better)
- 10% is how much experience you have with different types of credit (credit cards vs. loans)
- 10% is how often you’ve applied for credit in the past year (fewer applications are better)
What is a Credit Report?
Your credit score is based on information in your credit report, which is a compilation of your credit cards, loans, and other credit-based accounts. Your credit reports are maintained by credit bureaus, agencies which collect your data and sell it to businesses who need to make a credit decision about you.
There are three major credit bureaus in the U.S. – Equifax, Experian, and TransUnion – and you have a credit report at all three of them. Your credit report could be different at all three credit bureaus because not all of your banks and lenders report to all three of the bureaus. You may have some accounts that appear on all three of your credit reports and some accounts that only appear on one.
How to Check Your Credit Report
It’s a good idea to check your credit report at least once a year. First, to make sure you haven’t been a victim of identity theft or credit card fraud. Second, so you know your creditors are reporting the right information. Finally, you need to know where you stand on all your accounts, even if you don’t plan to apply for a credit card or loan anytime soon.
You can check all three of your credit reports once a year for free by visiting AnnualCreditReport.com. You’ll go through a short verification process and then your credit reports will be given to you. This website was set up to give you the free credit reports granted to you by Federal law.
Be careful about ordering “free” credit reports from other websites, especially those that ask you to enter a credit card number. These sites typically enroll you in a trial credit monitoring program, then charge you if you don’t cancel within a certain period of time.
You can also pay for your credit report by ordering directly from the three credit bureaus. They have options for purchasing one or three credit reports.
How to Order Your Credit Score
Unfortunately, the government doesn’t give us a free credit score every year. But, can get a free credit score as part of a free credit report offer – one of subscription deals that you must cancel to avoid getting charged.
CreditKarma.com offers a free credit score from TransUnion (one of the three major credit bureaus). You don’t have to enter a credit card to get your credit score from Credit Karma.
Finally, you can purchase your credit score from any of the three credit bureaus or from myFICO.com.