Having a credit card can offer all kinds of benefits. You can use it to manage your cash flow, allowing you to buy the stuff you need now, to then pay it off later. You can use it to build your credit score, making it easier to apply for heavier duty credit in the future, such as a home loan. And of course, there are all those lovely extras credit cards can offer, giving you access to perks and rewards as you use the card day-to-day.
Sounds good, right? Ready to apply? Unfortunately, that’s where things can get a bit tricky – for some applicants, at least. If you have a steady job with a good income, if you have good credit and are financially secure, if you don’t have heaps of debt in your name, then applying – and getting approved – for a credit card should be no big deal.
If you sit somewhere outside that box, however, finding approval may be more of a challenge. In this post, we’re going to investigate the employment and income aspect of getting approved for a credit card, looking specifically at what it means to get approved when you’re self-employed. From tips on how to improve your chances of approval, to what to expect when you apply, we’ll cover all that – plus, how to more efficiently manage your card once you start using it.
Want to apply for a credit card when unemployed? We’ll look at that too, including what it means to apply when you’re unemployed, on Centrelink, or earning any other form of income outside of that typical ‘employee’ status.
First though, let’s get into how you can improve your chances of getting approved for a credit card when you’re self-employed. In this section, we’ll look at the various tips you can employ to make your application run smoother, to then get approved for a card that will work well for your situation.
✓ Check your credit
When you’re self-employed, having good credit should go a long way towards getting approved. With good credit, you not only demonstrate your ability to repay, you also establish how responsible you have been with credit in the past. This essentially works to lower the risk for the card provider, making you a more appealing candidate.
There are a few different ways you can check your credit. A good place to start could be to go direct to Australia’s three main credit reporting agencies to apply for a copy of your credit report. Experian, Equifax and illion all allow you to access a copy of your credit report for free, with two offering easy online access, with a few handy tools thrown in as well.
Depending on the agency, you may be restricted in the number of times you can access your credit report each year without paying a fee. If keeping close tabs on your credit is important, you may choose to pay a fee for continuous access, alongside more of those credit-relevant tools.
Alternatively, you could check your credit using a third party provider. Again, some may charge a fee for this process. Before signing up, read the terms to find out how your data may be used by this third party, while also checking which reporting agency it uses to draw your information from.
|TIP: When you check your credit before applying for a credit card, it’s a good idea to gain access to your credit report from all three reporting agencies. Why? You don’t know which reporting agency the card provider will use. There could potentially be errors on one credit report and not the others, which left uncorrected, could pull down your credit score and your chances of approval.|
✓ Understand your finances
Another factor the card provider will pay attention to is your finances. When you have a salaried position, you enjoy a regular paycheque. When you’re self-employed, your pay be somewhat more sporadic. There may be months when you’ve got money coming in left, right and centre; and there may be leaner months, when the money you have coming in is much more sparse.
What the card provider wants to know is that you’ll be able to repay the money you spend on the card, regardless of whether you’re going through a lean period. Your credit report should help with this, especially if you have a history of always making your repayments on time. However, you will also need to provide evidence of your financial circumstances.
Before you apply, create a budget detailing exactly what you have coming in, and what you have going out. Prove to yourself first that you will be able to make your card repayments, before you attempt to prove this to the card provider. You can make your case more appealing by paying down other debts before you apply, and by building up your savings.
✓ Recognise your ability to repay
Consider how you will use the card before you apply. Will you use the card day-to-day, covering everyday expenses such as food and bills, just as you would use a debit card? Will you use the card to make large purchases? Or, will you keep the card for emergencies only?
Knowing what you will use the card for should help you choose a card that matches these needs, while also giving you a good idea of the credit limit you will need. If you opt for a high end card with a high credit limit, be aware that you will have to meet stricter eligibility requirements. These will come with a higher income requirement, and you will have to work harder to prove your ability to repay spending up to that higher limit.
On the other hand, choosing a more basic card with a lower limit could be easier to get approved for, especially if your income is more sporadic. It’s worth bearing in mind that you can start with a card such as this, and then work your way up the ladder by being a responsible cardholder.
✓ Gather your documentation
When you apply for a credit card when you’re self-employed, you will need to provide the standard documentation required by all applicants, plus a variety of additional information regarding your business and business income. Let’s start with standard documentation first, along with other information the card provider may ask for.
Each card provider has different requirements regarding the information and documentation self-employed applicants need to supply. Let’s take a look at what you may be expected to provide.
Preparing your documentation in advance will not only make your application run more smoothly, it should also allow you to more clearly see where both you and your business stands with regards to what kind of credit card you can apply for.
✓ Read the small print
To reduce the chances of your application being rejected, you need to know whether you are eligible. Not all cards will accept your application if you’re self-employed. Other cards may have much higher income requirements, or may only approve applicants who have a super high credit score. You need to know what is expected of you as an applicant by reading the small print.
|TIP: You may also need to have been in business for a certain number of years to be eligible to apply as a self-employed applicant. That may be one or two years, depending on the card provider. If you’re unsure, check with the provider before you apply.|
✓ Choose the right card
Lastly, of course, you need to choose the right card. Taking into account the various other pieces of information drawn together already, you should have a good idea of the type of card you need, as well as the type of card you can afford. Now, it’s time to compare your options. Here’s a quick rundown of the various types of cards you can choose from.
As a business owner, you have the option of choosing either a personal credit card or business credit card for your needs. So, which one is right for you?
A personal credit card may be a better option if:
A business credit card may suit you better if:
If you’re thinking about applying, but not sure if you should, here are some circumstances when it might pay to hold off on that application.
|TIP: If you can’t apply right now, but still need access to credit, you could ask your partner, or a trusted friend or family member to apply in their name, and then add you as an additional cardholder. Bear in mind that as the primary accountholder, it’s their credit at stake, so only spend what you know you can pay back and be prompt with your repayments.|
Ready to apply? Here’s what you can expect as you apply for a credit card when self-employed.
Use CreditCard.com.au to compare cards. You can check out the options within each category, to then narrow your options and dig a little deeper. Our handy comparison tool makes this faster and easier. Check out our reviews for each card to get a better idea of what it has to offer – and ask us any questions if you’re unsure.
|TIP: Even if you find a number of cards you really like the look of, don’t make the mistake of making multiple applications. As we mentioned earlier, this makes you look like more of a risk, and may result in your applications being declined.|
When you apply via CreditCard.com.au, you will be directed to the card provider’s site to complete the online application. As you answer each question, be sure to answer truthfully and accurately, while providing complete information. If the information you provide doesn’t add up, has gaps, or looks suspicious, it will delay the application with additional checks and queries.
Make sure you provide accurate contact information, as the card provider may come back to you to ask for further details or documentation. If this happens, be as prompt as you can with the response. It’s also a good idea to let your accountant know about the application, giving them time to collect all relevant info before the card provider makes contact.
As we covered earlier, you will likely have to provide more documentation being self-employed than you would if your were salaried. Find out exactly what documents you will need to hand over, then scan them and email them as directed. Being prompt with this should speed the approvals process along.
Once you’ve been approved, you should receive your card in the post within about a week. You can then activate the card and set up a PIN. If you applied for a balance transfer, this should be processed by your new card provider within the first few weeks from approval, after which point, it’s up to you to cancel the old card if needed, and start paying down your transferred balance.
Whether you opted for a personal credit card or a business credit card, familiarise yourself with the various tools on offer within the provider’s app or online banking set-up. You should also take time to look into the small print on any extras and rewards on offer, to make sure you make the most of them as you use the card.
Okay, so we pretty much have self-employed applications covered. Now to whether you can apply for a credit card when you’re unemployed, or when you’re on Centrelink.
Getting approved for a credit card when you’re unemployed is significantly harder than when you have a job. But, that doesn’t mean it’s impossible. You may be able to get approved if:
Aside from your income, the card provider will also look at other factors, such as your expenses and liabilities, and your credit history. Being able to prove you are not a risk is important. That means having a good credit history with no missed payments, no defaults, and no out-of-control debts. Have all your budget and your documentation in place before you apply.
Be aware, there are no ‘no credit check’ credit cards in Australia.
|TIP: Only apply for a credit card you can actually afford. If you are in a bad position financially, a credit card will only make your situation worse. If you’re struggling with debt, consider speaking to a professional, such as those on hand at the National Debt Helpline.|
✓ Choose a credit limit that won’t land you in trouble.
✓ Know how much you can afford to spend and repay each month.
✓ Utilise card tools to limit your spending where needed.
✓ Track your spending by monitoring your transactions.
✓ Create a buffer fund that you can fall back on to make your repayments during lean months.
Pauline is a personal finance expert at CreditCard.com.au, with 8 years in money, budgeting and property reporting under her belt. Pauline is passionate about seeing Aussies win by making their money – and their credit cards – work smarter, harder and bigger.
Something you need to know about this card? Ask our credit card expert a question.Ask a question