Managing your credit in a gig economy
Quick insights
- For those in the gig economy, a starter credit card may offer a way to begin building credit.
- Selecting a card with features that align with your income, expenses and credit history may help support better financial management while working in the gig economy.
- Tracking work-related spending can help keep personal and business finances organized.
The rise of the gig economy has reshaped the way many people earn a living. From rideshare drivers and delivery workers to freelancers and content creators, gig workers can often benefit from more flexibility; however, this may come with unique financial challenges. Whether you’re just starting your credit journey or looking to better manage expenses tied to self-employment, understanding how credit cards fit into your financial toolkit could be helpful.
How gig jobs could impact your credit
The gig economy is made up of independent workers who earn income through short-term, flexible or freelance opportunities. While this type of work typically offers some freedom and autonomy, it may come with certain financial complexities, especially when it comes to managing credit. Here are some common challenges gig workers may face when trying to build credit:
- Unpredictable income: Earnings may vary, which could make budgeting more difficult.
- Limited income documentation: Without traditional pay stubs or employer records, it may be harder to show proof of income when applying for credit.
- Limited credit access: When you're just starting out, your credit access and limit may be low. Also, it may be challenging to get approved for certain credit cards when you have limited or no credit history.
- Potential for inconsistent payment history: Missing or late payments can damage your credit score and slow your ability to qualify for better credit products over time.
Selecting a credit card that fits your needs
There are many credit cards on the market, and some may be more aligned with gig workers or new-to-credit individuals. Choosing a card that matches your spending habits and financial goals could be a helpful first step. Here are a few features and card types to consider:
- Starter cards designed for new-to-credit users: Some cards, like the Chase Freedom Rise® Credit Card, are available to individuals with limited credit history.
- Cards with fewer ongoing fees: Some credit cards do not charge certain recurring fees, which could make them more manageable for those with a variable income.
- Cards that offer rewards on everyday spending categories: Depending on your gig, cards that offer rewards (such as cash back) on gas, groceries, internet, cable and phone services may help you earn on common purchases.
- Terms that match your financial habits: Reviewing a card’s annual percentage rate (APR), fees, benefits and eligibility criteria may help determine which option aligns with your budget and goals. APR is the interest you’re charged if you don’t pay your credit card balance in full each month.
Credit score basics for gig workers and freelancers
Most credit scoring models look at several different factors when calculating your credit score. Understanding how these elements work may help you make informed decisions.
- Payment history: Payment history is one of the most important factors in credit scoring. Making at least the minimum payment on time every month can have a positive impact on your credit profile over time.
- Credit utilization ratio: Credit utilization refers to how much of your available credit you’re using. Keeping your balances low compared to your total credit limit may help you maintain a healthier utilization ratio (about 30% or less).
- Total debt: Scoring models may consider how much debt you owe across all credit accounts. Managing debt responsibly can support a stronger credit score.
- Length of credit history: The longer your accounts have been open and in good standing, the more likely your credit score will have a positive impact. Establishing and improving your credit score early can be helpful, regardless of having low or variable income.
How to manage your credit cards
For gig workers, income can change from week to week, which could make it harder to stick to a fixed budget. One way to stay on track is by setting up automatic payments, at least for the minimum amount due, to help avoid missed due dates. Keeping credit usage low and reviewing your statements regularly can help you stay organized and avoid surprises as your income fluctuates.
Keep track of influencer and gig-related expenses
Tracking purchases related to your gig work could help you manage your budget more effectively and stay organized throughout the year. Below are some tips to keep in mind:
- Categorize expenses by type of work: If you earn income from more than one gig, track how much you spend on each separately. For example, keep rideshare costs like gas or car maintenance apart from freelance expenses like software or tools. This helps you see the true cost of running each type of work.
- Store receipts and records: Keep documentation of your gig-related expenses to help with tax preparation or when reviewing annual financial performance.
- Sync cards with expense-tracking apps: Budgeting platforms or small business accounting tools may offer integration with your credit card account for improved tracking.
- Review monthly statements: Checking your credit card statement regularly could help you spot errors, track trends and stay within your planned budget.
Building credit while building your business
Whether you’re growing your influencer platform or managing multiple side hustles, strong credit may help play a role in reaching long-term financial goals. The following habits may support credit-building over time:
- Make payments on time: Good payment history is an important factor in building and maintaining a healthy credit score.
- Request credit limit increases when eligible: Over time, you may become eligible for a credit line increase. A higher limit could help lower your credit utilization ratio if your spending stays consistent.
- Avoid applying for multiple cards at once: Each application may result in a hard credit check on your credit report, which can temporarily decrease your score. Several hard credit checks in a short period of time could negatively affect your score.
- Monitor your credit: Using a free credit monitoring service or reviewing your credit report annually may help you stay informed and spot inaccuracies.
In summary
Gig work like deliveries, freelance projects and content creation often comes with unique financial responsibilities. Navigating credit in the gig economy may require a thoughtful approach, from selecting a credit card that fits your needs to tracking expenses related to your job. Credit cards like Chase Freedom Rise may be an option for individuals new to credit. By building consistent habits, such as on-time payments and mindful spending, gig workers can work toward a stronger credit profile that supports long-term financial goals.
