loans for self employed with bad credit

If you’ve struggled with obtaining credit in the past, it may have been because of your self-employed status. 

If you’re self-employed and don’t have the best credit score, then that’s going to be an additional barrier towards you obtaining credit as well.

Today, I’ll be looking at what your approach should be when trying to obtain a loan when you’re self-employed and have bad credit.

What is Credit Score and How can it Affect My Chances of Being Approved for a Loan? 

Your credit score (or credit rating) is a three-digit number which denotes how responsible you are when it comes to taking on debt and repaying it within the agreed-upon time.

It’s essentially a measure of how well you manage your finances.

Credit Reference Agencies (CRAs) are the ones who compile financial information about you into a credit report. 

Within your credit report (sometimes called your credit file or credit record), are records of all of your financial dealings such as any loans you took on in the past six years. 

When you’re applying for credit of any kind, lenders will look up your credit history in order to determine whether or not they want to give you a loan or not.

Obviously, having a good credit score and a good record of paying your debts within a reasonable time frame is going to resonate positively with potential lenders.

Similarly, you’ll find that looking for loans and getting approved for a loan with a bad credit rating is extremely difficult. 

This is because lenders are going to be apprehensive about giving loans to individuals with bad credit ratings as this is an indication that they are not good with handling their finances. 

How can I Check My Credit Score? 

You can look up your credit rating online on the websites of different Credit Reference Agencies.

Two major agencies whose websites you could go to are Experian or Equifax

Whether you have a credit rating that is good or bad depends on the agency you use.

For Experian, a credit rating of anywhere between 721 – 880 is considered to be a decent score. Anything between 881 – 960 is considered to be a good score and anything above 960 is considered to be an amazing score. Please note that the maximum credit rating you can have on Experian is 999.

For Equifax,  a rating of anywhere between 380 – 419 is considered to be a decent score. Anywhere between 420 – 465 is considered to be a fairly good score. Anything above 465 is considered to be an excellent score. Please note that the maximum credit rating you can have on Equifax is 700. 

bad credit loans

Why would Being Self-Employed Hinder My Ability to Secure Loans for Myself? 

Whenever you apply for any type of loan, lenders perform what is known as an “affordability assessment”. 

This is done in order to determine whether or not you will be able to comfortably make repayments towards the loan once you have been approved for it. 

As you can probably tell, one of the things that a lender definitely looks for when making an affordability assessment is a stable and steady source of income. 

Of course, the inherent nature of being self-employed means that your monthly income is not stable or steady. 

This is why many lenders are turned off by applications from self-employed people. 

So is it impossible for Me to Get a Loan if I’m Self-Employed? 

No. Finding a lender who will provide you with a loan if you’re self-employed is not impossible. 

Indeed, there are certain lenders who specialise in giving loans to self-employed people. 

Not only that but even with regular lenders, as long as you can prove that you will be able to comfortably make your debt repayments each month, you stand a fairly good chance of being approved for a loan. 

Whenever I’m offering guidance to individuals looking for self-employed loans (or any loan, for that matter!), I always urge them to find as much documentation regarding their budget as they can. 

All kinds of documentation that you can find regarding your expenses, loans, as well as your income, will go a long way in proving to your lender that you are more than capable of keeping up with your debt repayments. 

When applying for a self-employed loan, it’s very important that you lay out all sources of revenue that you have as well as provide proof for all of them. 

As an individual seeking self-employed loans, there is a chance that you may face higher interest rates compared to regular personal loans. 

It’s also important when you’re looking for a lender that you opt for one that is registered in England, Wales or Northern Ireland and is authorised and regulated by the Financial Conduct Authority (FCA).

This is important because lenders giving out self-employed loans who are authorised and regulated by the Financial Conduct Authority have to follow their guidelines which ensure that you are not mistreated in any way throughout the entire process.

You are protected by their guidelines and if you feel that you are being mistreated at any point, you can report the lender to the FCA. 

I’ve talked so far about how it’s not too difficult to find and secure self-employed loans if you do your research and scour the market thoroughly. However, if you’re self-employed AND have bad credit, then it’s an entirely different story.

These are two hurdles that can come between you and your approval for a loan and it’s important that you’re aware of how they affect your chances so you can take actions to increase your chances of getting your self-employed loan application approved. 

We’ve talked together about how you can find loans for self-employed people and how these self-employed loans are lucrative options for individuals seeking credit. 

Now, let’s talk about what you can do to get yourself approved for these self-employed loans if you have a bad credit rating. 

What are Some Things I can do to Improve My Credit Score? 

There are several steps you can take in order to build and improve your credit rating in order to secure self-employed loans.

In fact, I recommend everyone to take time to build their credit rating up before they apply for any type of loan. 

This is especially important when it comes to self-employed loans since they are even harder to get approved for when compared to regular loans.

Having a good credit rating when applying for a self-employed loan can definitely play a huge part in you getting your application approved. Having loans that you’ve repaid successfully in the past is an indication to the potential lender that you are responsible when it comes to your finances.

If it’s not an emergency and you need your self-employed loan for something that isn’t time-sensitive, I highly recommend that you wait a few months before actually applying to any lender for a self-employed loan. You should be using these months to improve your credit rating. 

One more thing to keep in mind is that a lot of providers of loans have their eligibility criteria available on their websites. It’s very important that you look at these criteria and ensure that you are eligible for the loan they’re offering. 

This is because if you apply to a loan that you aren’t eligible for and get rejected as a result, then it’s going to be mentioned in your credit report and will bring your credit rating down. 

I’ve been talking a lot about actions you take to build up your credit rating. So, what are these actions exactly? I’ve listed them below: 

  • Register yourself on the electoral roll at your current residence. Please note that you can still do this if you live with your parents or are living in shared accommodation such as with roommates. 
  • If you don’t have a lot of credit history, this can make it difficult for lenders to assess what your spending habits are like and whether you’ll be able to reliably pay back your debt or not. This is why I mentioned earlier that it’s a good idea to take a few months out before applying to a loan to build (or rebuild) your credit rating. 
  • So, how do you build a credit history? You do that simply by making repayments on time and in full each month. This is a great way of building up your score and proving to lenders that you can manage your credit in a responsible fashion. 
  • It’s important to keep your credit utilisation rate low. Your credit utilisation rate is the amount of credit you use compared to what your credit limit is. For example, if your credit limit is £1,000 and you use £500, then your credit utilisation rate would be 50%. As a rule of thumb, it’s a good idea to keep your credit utilisation rate below 25%. 

A simple and easy way of building up a good credit rating is having a low-interest or 0% interest credit card and using it only for essential living expenses such as groceries, utilities, etc.

Be sure to only spend as much as you can afford and pay off the outstanding limit on your credit card in full each month. 

Once you have built up a respectable credit rating, you’ll have much better luck when applying for self-employed loans. 

Another great thing about a good credit score is that you will normally be offered loans that have a much better interest rate. 

As a rule of thumb, the higher a risk you pose to lenders, the higher your interest rate is going to be. 


Finding a loan when you’re self-employed and have bad credit can definitely seem difficult but there are a number of different steps you can take to achieve that goal. 

As long as you take some time out to practice financial discipline, you will be able to find a lender and get a loan for yourself despite being self-employed. 

Furthermore, you will get it at a reasonable interest rate as well if you take the time to rebuild your credit rating.

About the author

Scott Nelson

Scott Nelson is a financial services expert, with over 10 years’ experience in the industry, including 6 years in FCA regulated companies. Read more
×4 Question Debt Write Off Calculator SEE IF YOU QUALIFY