Contractors are often assessed differently from other self-employed applicants, because some lenders will convert a current day rate into an annual income figure rather than relying only on 2 years of accounts or tax returns. That can help when your trading history is short, but it usually depends on how long you have contracted, whether there have been gaps, and how you are engaged: through an umbrella company, your own limited company, or as a sole trader.
This page looks at the contractor-specific detail that sits alongside the credit side of your application. For the general points on evidencing self-employed income, see our main page on self-employed bad credit remortgages.
On this page
This page covers
- Employment
- ContractorSome lenders assess contractors on their day rate rather than past accounts.
Read the main guide: Remortgaging when you are self-employed and have bad credit
In short
- Some lenders convert a day rate into an annual figure, usually where there is a track record in the same line of work.
- How you contract, umbrella, own limited company or sole trader, changes what evidence a lender needs.
- Gaps between contracts are common and are not automatically a problem, but lenders will usually ask about recent ones.
- A recent credit issue alongside a short contracting history is likely to be viewed more cautiously than either alone.
How do lenders turn a day rate into annual income?
Some lenders take your current day rate, multiply it by a working week and a set number of weeks a year, and use that as your income figure, rather than averaging accounts or tax returns. This is generally offered where you have a track record contracting in the same field, and where your current contract and rate can be evidenced.
Not every lender takes this approach. Others treat contractors like any other self-employed applicant, or like a limited company director, and use accounts and SA302s instead. Because adverse credit already narrows the field, it helps to know in advance which type of lender is being approached and what it will ask for.
Does it matter how you are engaged?
| How you contract | Income evidence often used | Typical documents |
|---|---|---|
| Umbrella company | Payslips, similar to employed income | Payslips, contract, sometimes a reference from the umbrella company |
| Own limited company (PSC) | Day rate, or salary plus dividends as a director | Current and past contracts, company accounts, SA302s |
| Sole trader contractor | Net profit from accounts or SA302s, or a day rate depending on the lender | SA302s, tax year overviews, contract history |
General information only. Lenders set their own criteria, and which figures they use can change.
Contracting through your own limited company adds the points covered on our company directors page, including how salary, dividends and retained profit are weighed.
What about gaps between contracts?
Gaps are normal in contracting, and most lenders that work with contractors expect some. What they usually look at is the pattern: how long the current contract has run, how quickly previous gaps were filled, and whether a recent gap is unusually long. Some lenders ask for a short written explanation of any gap over a certain length.
IR35 status
A small number of lenders ask about your IR35 status, because it can affect how your income is taxed and therefore evidenced. This is a specialist area, and if you are unsure how your current contract is classified, your accountant or agency should be able to confirm it before you apply.
Where a credit issue happened during or shortly after a gap between contracts, it can help to be able to show what changed: for example, that the gap has since ended and income is now steady. Our page on remortgaging with missed payments covers how lenders generally view issues linked to a temporary drop in income.
Preparing a contractor application
- Your current contract, showing the day rate, start date and any end or review date.
- A history of previous contracts, ideally showing continuity in the same field.
- An explanation ready for any gap of more than a few weeks.
- Umbrella company payslips, or company accounts and SA302s if you contract through your own company.
- Your personal credit reports from Experian, Equifax and TransUnion.
- Confirmation of your IR35 status if your agency or accountant has assessed it.
As with any self-employed application, more equity can widen the field of lenders willing to look at a shorter or less conventional income history alongside a credit issue. See our guide on how loan-to-value affects a bad credit remortgage.
What may affect a contractor’s remortgage options
| Factor | Why it matters |
|---|---|
| Length of contracting history | A longer track record in the same field usually gives a lender more confidence in a day-rate figure. |
| Current contract terms | The day rate, start date and any renewal or review date on your present contract. |
| Gaps between contracts | How frequent and how long recent gaps have been, and whether they can be explained. |
| How you are engaged | Umbrella, own limited company or sole trader changes the evidence a lender will ask for. |
| IR35 status | Relevant to a small number of lenders when assessing how your contract income is taxed. |
| Age and status of the credit issue | How recent, how large, and whether it coincided with a gap in contracts. |
| Mortgage payment history | Whether payments have continued on time, particularly through any quiet periods. |
| Loan to value | How much you want to borrow against the property’s current value. |
These are general points, not lender rules. Each lender sets and changes its own criteria.
Information an adviser may ask for
You don’t need all of this to make an enquiry. It helps to know where to find it, because an adviser is likely to ask about most of it.
- Your current contract, with day rate and dates
- A history of previous contracts and any gaps between them
- Payslips (umbrella) or company accounts and SA302s (own limited company)
- Your IR35 status if known
- Your personal credit reports from Experian, Equifax and TransUnion
- An explanation of when and why any credit issues happened
Frequently asked questions
Will a lender just use my day rate?
Some will, usually where you have a track record contracting in the same field and can evidence your current contract. Others assess contractors like any other self-employed applicant, using accounts or SA302s, or like a director if you contract through your own company. Which approach applies can significantly change your income figure.
Does a gap between contracts count against me?
A single, explained gap is common and not usually treated as a problem on its own. Lenders more often look at the overall pattern: how long the current contract has run and whether gaps have been unusually long or frequent recently.
Do umbrella company contractors need different evidence from limited company contractors?
Often, yes. Umbrella payslips look similar to employed income, while your own limited company usually means providing company accounts, SA302s and details of salary and dividends, as covered on our company directors page.
I only have a year of contracting history. Can I still remortgage with bad credit?
It may be possible, though it is one of the harder combinations, since fewer lenders consider both a short trading history and adverse credit. See our page on remortgaging with one year’s accounts for how a shorter history is generally approached.