Credit Card Debt – Bad for Self Employment

The following is a guest post.

If you are self-employed, chances are you have been inundated with credit card offers in your mailbox.  Every business seems to get bombarded with offers every day.  However, what many self employed individuals don’t realize is how detrimental credit card debt can be.  Credit is essential to most self-employed small businesses, and being in debt makes that credit harder to come by.

What You Need Credit For?

If you are self-employed, there are variety of things that you could need credit for.  As the old adage goes, “It takes money to make money” and that is incredibly true.    Even for the smallest eBay seller, you need to buy supplies such as shipping and postage.  And if you are waiting to get paid, you need to purchase these items on credit first.

The need for a credit card can be great depending on the business.  If you’re mobile, you may need to purchase gas.  You may need to book travel to meet a client, or pay for a bunch of proposals to be professionally printed.  Either way, until the revenue comes in, the credit needs to be there.

How Credit Card Debt Hurts You

Being in credit card debt can negatively impact your credit score, which, in turn, makes lenders less likely to extend credit to you.  Since most banks view a business line of credit (even a business credit card) as risky to begin with, your poor credit history will not help you.

If you do have a low credit score due to credit card debt, and the bank is willing to extend you a credit card, you will most likely end up paying higher interest rates and fees, and usually have a lower line of credit.  Both of these could make using the credit card more difficult.

As a result, you should strongly consider building a solid credit score and credit report prior to getting a line of credit for your business.  Even if you’re self employed, having good credit is essential.


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