Uber Driver’s How To Build Your Credit Score
Uber and Lyft are attractive options for anyone interested in making their own hours, working for themselves, and meeting new people while on the job. But, like most jobs in the gig economy, finding financial success as an Uber driver can be a tricky proposition.
According to research by NerdWallet, the average income of an Uber or Lyft driver is R12 per hour. That’s less than workers at a supermarket make – and close to the lowest paid industry in the SA, competing with the fast food industry for the (dis)honor. Though the flexibility of rideshare driving is unparalleled, financial security for these workers remains elusive.
Building a credit score, however, is one area where rideshare drivers can invest in their financial future. There are a number of ways to build your credit score while working for Uber, Lyft, or another competitor. Here’s how.
Take out a car loan
This may seem counterintuitive, but one way to build credit is to go into debt (responsibly). Your credit score is based on your history of paying loans. When you pay your loans on time, 100% of the time, you can build your credit. A car loan is one way to start to make regular payments that can count positively toward your credit score.
For people with little or no credit, getting a car loan can be a challenge – or, your loan may come with higher interest rates. Experts warn that people with low or nonexistent credit may be charged 5-7% higher interest rates than “normal.” For Uber drivers, this financial burden is unsustainable. Therefore, if you’re interested in getting a car loan for the purpose of building your credit score, look for a cheap, used car. Set up a payment plan with interest rates as low as you can negotiate them. Over time, you’ll still build credit and see the benefit of having the loan.
Get a business and gas credit card
Many sole proprietors and rideshare drivers use one account for their business and personal expenses. However, it’s a good idea to separate the two. Get a business checking account to keep track of your expenses for tax purposes. If you decide to form an LLC, you’re actually required to isolate your business and personal expenses in different accounts.
In addition, you can link your business account to a business credit card. There are many cards that rideshare drivers can take advantage of to get gas points. Look for cards that give percentage cash back on gas purchases. The savings add up quickly. When a card offers 1% cash back, you can save is R2 per liter at current gas prices. Plus, you’ll be building credit along the way. Uber even has a credit card that it makes available to rideshare drivers. Here are some other good options for gas points (note that all offers are valid as of May 2019).
Standard Bank And FNB bank offers rewards with there banking and credit cards.
Consider renting a car
If you already have bad or no credit, taking out a loan for a car may not be an option. In that case, renting (through Uber or otherwise) may be your best bet.
Uber offers something called the Vehicle Solutions Program. This program provides “rentals and partnerships to help you get a car and start driving,” with hourly, weekly, or longer-term contracts available. Depending on the city, Uber works with different partners like Hertz, Fair, and Getaround to get you a deal on a lease. The rental payments may only be slightly less than an auto loan payment, but there are some benefits to renting instead of owning, especially in terms of your credit score. If your car breaks down, you don’t have the responsibility for paying for the repair – costs that can seriously hit your credit. In addition, you get the benefit of roadside assistance and other protection.
There are some car financing options that are specifically designed for rideshare drivers HyreCar offers a rent-to-own program where a portion of the money you earn while driving for Lyft and Uber goes toward a down payment on the vehicle you are renting. It’s another option for those drivers seeking to build their credit score without taking on debt.
Do the research on rideshare insurance
Should the worst-case scenario happen and you get into an accident, your insurance may not cover you fully. This means you could be on the hook for medical bills and damage to your car. It’s possible that you would have to pay for costs above these liability limits:
In South Africa Uber has partnered with insurance companies to offer competitive insurance Read More Here to Uber drivers.
Not only is your personal auto insurance unlikely to cover you during your ridesharing time, but you run the risk of having your policy canceled. Therefore, look into a specific rideshare insurance policy to protect your credit score if you suddenly need to pay for an unexpected disaster.
Check your score
Make sure you’re keeping an eye on your credit score over time to see how your financial decisions are having an impact. Use one of these free tools to check your credit every few months:
Credit Bureau SA
Overall, Uber and Lyft drivers can achieve a good credit score by paying bills on time, taking advantage of gas points, and being proactive to protect your credit with rideshare insurance.