Here's the Fastest Way to Boost Your Credit Score as a Gig Worker

If your monthly budget is based on your income as a gig worker, it can be difficult to build credit -- especially if you didn't already have an established track record of responsible credit usage before you became one. After all, gig workers often have inconsistent incomes, which can make it difficult to qualify for mortgages and auto loans, at least until you establish a steady income record over a period of years.

I'm a Certified Financial Planner™, but I've also been in the same boat. I'm technically a self-employed gig worker myself, and have been for over a decade. And when I started, I did not have strong credit -- but I do now. Here's how I did it, and how you can give your credit score a jumpstart.

Building truly great credit as a gig worker can take time

First, consider how your credit score is calculated. While the FICO® Score formula is a closely-guarded secret, we do know the weighted categories of information that it uses:

• 35% of your score comes from your payment history
• 30% comes from the amounts you owe
• 15% comes from the length of your credit history
• 10% comes from new credit
• 10% comes from your credit mix

Much of this takes a long time to truly maximize. For example, it takes a long time to establish a history of responsible on-time payments. The "length of your credit history" category is weighted in favor of long-established credit accounts. And with your credit mix, which considers the variety of accounts on your credit report, it can take at least a couple of years of steady self-employment income to qualify for a mortgage or other type of installment loan.

Gig workers can certainly achieve great credit. My credit score has been in the 800s for much of the past several years and I haven't had a full-time W-2 job since 2013. But to get there (especially from a low starting point) takes time.

There are some ways you can have a quick impact

Having said all of that, there are some ways that you can have a meaningful impact in a short period of time.

Some of these are very specific to your situation. For example, if you have unpaid collection accounts on your credit report, getting those settled or paid off can be the easiest way to boost your score.

However, getting a credit card and using it responsibly can be the quickest way to have a meaningful impact on your credit score as a gig worker. This is especially true if you don't already have one.

Think of it this way. Using a credit card and paying the balance off each month establishes a strong payment history (just a few months can be a big credit score boost if you don't already have any active credit accounts). It also helps the "amounts you owe" category, as paying the balance each month keeps this at a minimum.

As a gig worker, you can also qualify for business credit cards, which can provide perks that are extremely valuable to you and can reward you for necessary business spending. Or, if you travel for your gig employment, a travel credit card can be a valuable financial tool.

If you don't have any established credit, or you're trying to overcome an adverse credit history, it can be impossible to get a standard credit card. In this case, a secured credit card could be the solution. Secured credit cards work in the same way as standard credit cards -- they report your payment activity to the credit bureaus each month, charge interest on carried balances, and more -- but they require a security deposit to open. I used a secured credit card to rebuild my credit about 15 years ago, and can tell you firsthand that getting one and using it wisely can make a big difference.

The bottom line

To be sure, this advice doesn't apply to everyone. If you already have an established credit history prior to becoming a gig worker and already have credit cards, a mortgage, or other loans with a strong payment track record, opening a new credit card is unlikely to have a major credit score impact. But if that's not the case, and you want to make your score rise in just a few months, getting a credit card and using it wisely can be a smart choice.