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MortgageOS
Credit Guide

Self-Employed Credit Checks: What Mortgage Lenders Really See

Understanding how lenders assess credit for self-employed applicants, contractors, and Ltd company directors — including personal and business credit files.

Updated January 202612 min read

The Credit Check Landscape

When you apply for a mortgage as a self-employed person, lenders don't just look at your income — they examine your credit profile in detail. For Ltd company directors, this often means scrutiny of both your personal credit file and your business credit report.

The dual credit check

As a Ltd company director, your mortgage application may trigger two types of credit assessment: a personal credit check (like any applicant) and a business credit review through agencies like Creditsafe or Experian Business. Both can influence your approval.

How Self-Employed Differs from Employed

Employed applicants have straightforward credit assessments — lenders check their personal credit file, verify income via payslips, and assess affordability. For self-employed applicants, the picture is more complex:

Employed Applicant

  • Personal credit file checked
  • Income verified via payslips
  • Single income source
  • No business assessment needed

Self-Employed Applicant

  • Personal credit file checked
  • Business credit may be checked (Ltd)
  • Company accounts reviewed
  • Income sustainability assessed
  • Director's loan position examined

Personal vs Business Credit Files

Understanding the distinction between personal and business credit is crucial. They're separate files, maintained by different agencies, but both can affect your mortgage application.

Personal Credit File

Your personal credit file contains your individual financial history. This is the primary file lenders check for mortgage decisions.

What it includes:

  • Personal loans, credit cards, and mortgages
  • Payment history on all personal accounts
  • Electoral roll registration
  • CCJs, bankruptcies, IVAs registered to you personally
  • Credit searches from applications you've made
  • Financial associations (joint accounts, linked addresses)

Agencies: Experian, Equifax, TransUnion

Business Credit File

Your company's credit file is separate from your personal file. It tracks your business's financial behaviour and creditworthiness.

What it includes:

  • Company registration and director information
  • Filed company accounts and financial health indicators
  • Trade credit payment history (supplier payments)
  • Business loans and credit facilities
  • CCJs registered against the company
  • Credit score and risk rating

Agencies: Creditsafe, Experian Business, Dun & Bradstreet

Sole traders: no separate business file

If you're a sole trader, you don't have a separate business credit file. Your business activity is tied to you personally, so only your personal credit file exists. Any business debts or issues appear on your personal record.

What Lenders See on Your File

Personal Credit: Key Data Points

When lenders check your personal credit file, they're looking at specific elements that indicate financial reliability:

Personal Credit Report Summary

Payment HistoryNo missed payments (36 months)
Credit Utilisation23% of available credit used
Active Accounts4 (2 credit cards, 1 loan, 1 mortgage)
Recent Searches2 hard searches (last 12 months)
Adverse InformationNone
Electoral RollRegistered since 2019

Business Credit: What's Examined

For Ltd company directors, lenders may access business credit reports to assess company stability. Here's what they look for:

Financial Health Indicators

  • Credit score/rating (0-100 or A-F)
  • Credit limit recommendations
  • Risk of failure assessments
  • Net worth and asset position

Payment Behaviour

  • Days Beyond Terms (DBT) score
  • Trade credit payment patterns
  • Supplier payment history
  • Outstanding judgments

Director's Loans and Credit

Director's loan accounts (DLAs) don't appear on personal credit files in the traditional sense, but they significantly impact mortgage applications through other channels.

How DLAs Are Visible to Lenders

In Company Accounts

Your DLA balance appears in the company's balance sheet, which lenders review as part of your application. An overdrawn balance is immediately visible.

On Application Forms

Many lenders specifically ask about director's loans on their application forms. Lying about this can result in application rejection or fraud issues.

Through Underwriter Questions

Underwriters often ask about DLA positions during the assessment process, particularly if they spot large movements in company accounts.

Overdrawn DLA = hidden debt

An overdrawn director's loan account is essentially money you owe to your company. Lenders may treat this as a debt, reducing your borrowing capacity or raising concerns about your cash management.

Impact on Mortgage Applications

-
Overdrawn DLA (you owe company): Can reduce affordability, trigger additional questions, or cause decline with some lenders.
+
DLA in credit (company owes you): Generally positive — shows you've put money into the business rather than extracting too much.

Business Credit Agencies

Unlike personal credit (where Experian, Equifax, and TransUnion dominate), business credit is tracked by different agencies. Understanding these helps you monitor what lenders might see.

Creditsafe

Most common

The UK's most widely used business credit agency. Many mortgage lenders and brokers subscribe to Creditsafe for company checks.

Score range: 0-100

Key metric: Credit Limit Recommendation

Access: One free report per year at creditsafe.com

Experian Business

The business arm of Experian, offering detailed company credit reports including payment behaviour and risk scores.

Score range: 0-100

Key metric: Commercial Delphi Score

Access: Paid reports via experian.co.uk/business

Dun & Bradstreet

International business credit agency with a long history. Uses the D-U-N-S numbering system to identify businesses globally.

Score range: 1-5 (Failure Score)

Key metric: PAYDEX Score (payment behaviour)

Access: Via dnb.co.uk

Building Business Credit

Unlike personal credit which builds passively over time, business credit often requires active management:

  • Trade credit accounts: Open accounts with suppliers who report payment data
  • Pay early or on time: Payment behaviour directly impacts your business credit score
  • File accounts promptly: Delayed company accounts filings damage credit ratings
  • Maintain accurate Companies House records: Outdated information raises red flags
  • Keep director information current: Linked personal credit can affect business scores

Red Flags for Self-Employed Applicants

Lenders are particularly vigilant about certain credit issues when assessing self-employed applicants. These red flags can trigger additional scrutiny or outright decline.

Personal Credit Red Flags

  • Recent defaults or CCJs: Especially within the last 2-3 years
  • Multiple credit applications: Suggests financial stress or desperation
  • High credit utilisation: Using 90%+ of available credit
  • Payday loan history: Major concern for most lenders
  • Gambling transactions: Visible on bank statements, raises lifestyle concerns
  • Bounced payments: Failed direct debits, especially mortgage or rent

Business Credit Red Flags

  • CCJs against the company: Suggests poor financial management
  • Poor payment history: Consistently paying suppliers late
  • Low or declining credit score: Indicates increasing risk
  • Late filed accounts: Companies House penalties visible
  • Recent director changes: Can raise questions about stability
  • Winding up petitions: Even if resolved, these are serious concerns

Self-Employed Specific Concerns

  • Large overdrawn DLA: Indicates spending beyond declared income
  • Income volatility: Significant swings between years
  • Multiple business ventures: Complexity without clear income trail
  • Recent business structure changes: New Ltd company after sole trader failure
  • Mismatch between lifestyle and declared income: Expensive lifestyle on paper-low income

Context matters

Some red flags are absolute (recent bankruptcy will prevent most mortgages), but many depend on context. A specialist broker can help present your situation positively and find lenders who will consider the full picture.

Improving Your Credit Position

If you're planning to apply for a mortgage in the next 12 months, here's how to strengthen both your personal and business credit profiles.

Personal Credit Improvements

Quick Wins (1-3 months)

  • Register on electoral roll
  • Reduce credit card balances to <30%
  • Set up direct debits for all payments
  • Check reports for errors and dispute
  • Close unused credit accounts

Longer Term (3-12 months)

  • Build positive payment history
  • Avoid all new credit applications
  • Pay down outstanding loans
  • Let old adverse data age
  • Disassociate from poor credit connections

Business Credit Improvements

Quick Wins (1-3 months)

  • File any overdue accounts immediately
  • Update Companies House records
  • Pay all supplier invoices on time
  • Clear any outstanding CCJs
  • Check and correct business credit reports

Longer Term (3-12 months)

  • Build trade credit relationships
  • Establish consistent payment patterns
  • Clear or reduce overdrawn DLA
  • Maintain healthy company reserves
  • File accounts well before deadline

Director's Loan Account Strategy

If you have an overdrawn DLA, consider these approaches before applying:

  1. 1.
    Declare dividends to clear the balance — If you have distributable reserves, vote dividends to offset the overdrawn amount.
  2. 2.
    Repay from personal funds — Transfer money back to the company to clear or reduce the balance.
  3. 3.
    Vote a bonus — A director's bonus (taxed as income) can clear the DLA balance.
  4. 4.
    Time your application — Apply after your year-end so the cleared position appears in your accounts.

Start early

Credit improvements take time to reflect in your reports and scores. Start working on both personal and business credit at least 6-12 months before you plan to apply for your mortgage.

Understand your credit position

Get clarity on how lenders will view your personal and business credit before you apply.

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Frequently asked questions