self employed ?? nobody wants to know you !

darryljp

I have been self employed for the last seven months (sole trader)and previous to this have never had a problem with applying for credit cards / remortgaging etc..
Now i understand its a risk for any creditor to give credit to anyone who's not got 'guaranteed' income or more secure income.
I have an excellent credit score(according to experian) so i applied for a 0% credit card to transfer my existing card onto , also our independant financial advisor enquired about remortgaging.(we are on an offset mortgage with nothing offsetting against it !!)
The credit card application was turned down and as for remortgaging we were told theres no deal out there for us but to stay as we are because of the fact i am self employed.
Is it really that bad ? if so i may have to quit my job and go back into mainstream employment.
Any suggestions welcome, thanks in advance.

dunstonh

7 months gives you no track record under your current situation. You may have a good credit record but that was applicable to a time you were employed. You have effectively started from scratch again.

It gets easier once your first accounts have been produced. It gets to the same position as employed people after 3 years.

Being self employed has its pros and cons. Borrowing is one of the negatives as is getting a lower state pension but paying less tax and earning more compensates for that.

If you cease being self employed and go back to employed, it will take you another 6-12 months to get credit again like you used to as you are starting all over again (again!)

herbiesjp

Your situation is not the easiest to place with a lender due to the short track record as self employed - but there are still lenders that can still look at this for you

loobs40

I am a computer contractor and until December last year I had my own Limited Company. That was not out of choice, but because employers and agencies have always required this.

I have now converted to being self employed (for various tax saving reasons) but I am doing exactly the same job.

Is my credit rating going to be affected as a result?

herbiesjp

It should not affect your credit rating - just the way lenders will look at your mortgage application

loobs40

My income will be made up of salary (low) and other income (very high). In effect my earnings per year will be more than enough to afford monthly payments on a decent size mortgage.

My current mortgage is 120k give or take, and is a fixed rate due to finish next year. I will be looking to move to another mortgage lender. Is is the case that I will have to go for a self certification rate which seem to be at slightly higher rates than 'normal' mortgage rates ?

herbiesjp

If the fixed rate ends next year you still have time to go - self certification will not be the only route available and there will be other options hopefully that you could look at.

rdcuk

I found an IFA who was able to get me a mortgage 5.15% 2Year Fixed rate with First Active. I'm in the same situation - self employed for just 3 months.

Fairdo_2

Depending on Loan To Value (Amount of borrowing against the value of your home as a %age), it may be possible for some lenders to consider you on an "affordability" basis. If you are doing a £ for £ (or as some lenders call it a debt for debt) basis, you may be able to demonstrate that the payments will be lower and that responsible lending is justified if you have had healthy finances with the existing loan.

I have just done this with a client on just over 5 x her income and she has a fantastic record of affording the previous mortgage and I have just saved her just under £100 per month of being on Standard Variable Rate because her current lender would not offer her a rate.

The Lender was Halifax!!! so they do sometimes use common sense. Income was declared truly and the case was agreed, subject to credit score and valuation, based on current affordability.

Again for darryljp and loobs40, a mainstream lender could take a common sense approach to your circumstance. A lot of the time it is how you present your case in the first place. I've said it a few times before, but try to get a broker with some nouse to look at your case overall and find the best way to present you as a case to the lenders.

Poppy9

When we remortgaged 10 years ago my oh was self employed and I was working p/time. At the time it was easier to apply for a mortgage just using my salary rather than have to submit accounts etc and the deals were better. They allowed us to borrow upto 4.5 of my salary as they knew there was another income and we were only borrowing 40% of house value. This too was with Halifax.