Do you need good credit to lease a car?
Anyone who is aware they have bad credit or is concerned they may not have a good credit rating may be unsure whether they can lease a car.
Before placing your order, the finance company will perform a credit check to access more detail about your credit history. Whether or not you are successful with your application may - in part - depend on your credit rating. If you are deemed too much of a risk, it could be refused.
Alternatively, further clarification about your financial status may be requested to offer more assurance that payments will not be missed.
Why is a car lease credit check needed?
Leasing a car is a form of credit, as the driver is being entrusted with a vehicle worth thousands of pounds, while only being required to pay a fraction of its worth on a monthly basis.
Credit companies view a lease deal in a similar way to a loan. However, rather than the loan amount being the same as the value of the car, it will be equivalent to the total amount of payments.
Performing a car lease credit check is one of the ways that a finance company can determine if you are financially stable enough to be able to pay the monthly instalments. Your credit score looks back at the past six years, reviewing your financial history, as well as any overdrafts in your name, electoral roll information and more. We would not want somebody to take a lease out which they could then not comfortably afford.
There are three main credit referencing agencies in the UK: Experian, Equifax and TransUnion. It is difficult to compare their scoring systems directly, as they each rely on separate criteria, but the final score they produce will be easy to understand.
Will leasing a car improve my credit score?
The simple answer is: yes, it could. However, you should remember that you must keep up all payments and make them promptly and improving your credit score takes time. At first, a new lease contract may have a negative effect on your score. This is simply because more credit is being placed onto your credit file.
As long as you continue to pay the monthly instalments on time and without any issues, this will gradually improve your credit rating. In turn, this should make it easier for you to request credit from other organisations in the future.