Why do you need good credit for a business car lease?
Like with any other form of credit you try to obtain for personal or business reasons, our funders want to verify you are able to comfortably afford the agreed payments. To ensure this, funders will run a check on your previous credit history. The better the company’s history, the easier it usually is to secure the credit your business is after.
This is because your credit rating will have a direct impact on what you will be asked to pay on the business lease. If you have a poor credit history, the monthly payments may be more expensive, depending on which funder provides the contract.
What is shown on a company credit report?
Each financial company will have a different process, but all will consider your credit report. Here is the information a funder may look at from your report:
- Your full name, date of birth and current address
- Any previous credit limits, mortgages and any type of loan
- Electoral roll information
- Information related to any current account overdraft
- Missed or late payments related to outstanding credit and how many times
- Highlighting any financial links to other people
- Six years’ worth of information related to bankruptcies, CCJs or debt issues
- Whether your identity has been used for fraud
Do I need any other financial documents?
As well as your credit report, funders will normally need:
- 3-6 month's business bank statements
- Names/addresses of director(s
- Opening balance sheet (if available)
New companies may also need to offer more account information. You can learn about new business car leasing here.
All financial documents are there to show the provider that you can comfortably afford the lease payments. If your monthly payments are affected by bad credit, read on to find out how you can improve your company’s score.
How to improve your business credit score
Here are five steps you can take to improve your credit rating:
1. Obtain your credit report
The first step is to get a direct look at the same credit report the financial company has seen. This can be obtained for free from the likes of Experian and Equifax. Make sure all of the information is correct and if there are any mistakes, be sure to point these out so they can be corrected.
2. Keep your current account in credit
Wherever possible, avoid falling into the overdraft and if you have any old business accounts that are lying dormant, be sure to close them if they are not likely to be used in the future.
3. Get a credit card
If your credit is good enough to get one, using a credit card to boost your score is a good move. This means ensuring the balance is always paid off each month, along with any charges.
Cards with 0% introductory rates are often the best starting point, but always check when the introductory rate ends. Be sure you can afford this before getting one, as being unable to pay your debt will only make your credit score worse.
4. Keep on top of bills
Pay all of your company's bills on time and ensure they are in your businesses’ name. Change to using direct debit wherever possible, as this makes it easier to pay on time while also helping your credit score.
5. Cut down on applications
Every time you apply for credit it leaves behind a ‘footprint’. If you believe you are unlikely to secure the line of credit, then it is best to avoid applying until your credit score has improved.
How long will it take to improve my score?
What must be remembered is that your credit history is not something you can rectify in a few days or weeks. The minimum amount of time you will need to see a noticeable change to your credit rating will be a number of months.
While this may seem like a long time, if your credit history only needs to be improved slightly, it can really benefit your business in the long run.
For more information on business cars, read our complete guide to see how the process works.