 TITLE: Does Being Self-Employed Affect Your Credit? CONTENT: Does Self-Employment Make It More Difficult to Get Credit?\n----------------------------------------------------------\nYour credit history is just one of the \"five Cs\" that lenders look at when determining your eligibility for credit. The other four are _capital_ (any assets you can use to repay a loan), _capacity_ (your monthly income), _collateral_ (any assets you can use to secure the loan) and _conditions_ (such as the amount and terms of the loan or the current state of the economy).\nYour income itself is not a factor in your credit score. However, lenders do consider your debt-to-income ratio, which compares the total amount you owe every month to your total income. An acceptable debt-to-income ratio depends on the lender's criteria, the type of loan you're seeking and a variety of other factors. In general, if your ratio is 50% or above, lenders may feel you already have too much debt and deny your credit application.\nSome lenders may view self-employed borrowers as riskier than those who work for someone else. There are several reasons for this. If you're relatively new to self-employment, you may not have a long track record of successfully generating income. Even if you've been self-employed for quite a while, you might make a lot of sales one month and fewer the next, or your customers may take a long time to pay their invoices. As a result of these natural ups and downs, your income is likely to be less stable than that of an employee receiving a regular paycheck.\nDepending on the nature of your business, you may also have taken on a lot of debt to get it up and running. If you've invested a lot of your own money in your business, you might be left with few liquid assets you can tap to pay off your loans in a crunch. Both can work against you when applying for more debt—but there are steps you can take to improve your situation. END