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Car Leasing With Bad Credit
Leasing is a great option for anyone looking for affordable monthly motoring. However, as it's a form of car finance – is it still possible to lease a car if you have poor credit?
Below, our guide details everything you need to know about leasing with bad credit and what the options are if you're looking to drive a brand-new vehicle.
Do you need good credit to lease a car?
In most cases, having a good to excellent credit score is preferable. But that doesn't mean you are necessarily ruled out of car leasing if you have a poor credit rating. For example, Leasing Options work with specialist funders to help drivers with bad credit.
So you might not get turned down based on your credit rating. However, further clarification about your financial status may be requested to offer more assurance that payments will not be missed.
How do I check my credit score?
An easy way to check your credit rating is via the Leasing Options finance eligibility checker. This offers you a realistic view of your success in a leasing application. In addition, using this resource doesn't affect your credit report. So, you'll get a good idea before starting the process.
Alternatively, there are several credit reference companies that offer free tools to check your credit score. They include:
What credit score do you need to lease a car?
In many cases, you'll need to have at least a 'good' score to apply for a lease car. For example, if you use Experian's credit report tool, it highlights a minimum of 800+ to successfully pass your credit check to be able to lease a car.
What's the lowest credit score to lease a car?
The credit score you need to lease a car will vary between each leasing company. For Leasing Options, to pass your credit check to lease a car, ideally, you need a score of 800 or more.
Use our eligibility checker to get an idea of whether you'll be accepted before applying.
If you don't have the required credit score, there may be options available. Please call one of our advisors, and we will see how we can help.
Why do I need a credit check to lease a car?
Leasing a car is a form of credit, as the driver is entrusted with a vehicle worth thousands of pounds while only being required to pay a fraction of its worth every month.
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. This also protects you as the customer, as it ensures you can comfortably afford the car lease.
What do finance companies see in my credit report?
Credit reports keep a record of a range of personal details, including address history and financial records. When a leasing company does a credit check, they can access this data to ensure you are suitable for finance.
Generally, funders will look at:
Your full name and date of birth
Your credit report will show names you go by and previous names, for example, maiden names.
Current and previous address history
Your current address and previous addresses are included. Finance applications often require the details of your address in the past three to five years.
Your financial history
Leasing companies look at data regarding your financial records over the past six years, including previous credit limits, mortgages, loans, overdrafts, bankruptcies, CCJs or debt issues.
Electoral roll information
This should match your current address details.
Financial links to other people
This information looks at your ties to other people regarding joint loans, bank accounts etc. and how these may affect managing additional finance.
Whether your identity has been used for fraud
Any fraud or issues with your credit profile will also be flagged.
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How do I lease a car with bad credit?
Every leasing company has different criteria, but if you have poor credit, there are options available to help you secure a car lease.
Paying more upfront
Increasing your initial payment means monthly instalments are less over the contract period. This also creates less risk for the finance company, as they'll be less paid over the agreement period.
Using a guarantor
Some leasing companies allow people with bad credit to have a guarantor for the car lease. This means the designated person will be responsible for any payments if you encounter difficulties. In order to be accepted as a guarantor, they will need to have a good/excellent credit score.
Longer or shorter contract
In both cases, this option could help. Longer contracts mean you'll pay less each month, so this may be more manageable for your budget, which presents less risk to the finance company. Alternatively, a shorter lease agreement means it is paid off quicker – this could help to improve your score for the next lease.
Joint lease agreement
Some leasing companies accept joint lease applications. So, for example, if your spouse has a better credit score than you, this could work favourably in being accepted.
How do I improve my credit score?
While leasing a car with bad credit is still possible, it is more difficult to meet the specific requirements.
As a general rule, most finance companies ask that applicants have a credit score that is somewhere between 'good' to 'excellent' in order to be successful. Most ratings range between five different categories, usually starting at 'very poor'.
So, what can you do to lease a car if you have bad credit?
Show proof of income
Anyone applying to lease a car must demonstrate they have enough income to pay for the monthly instalments. If you have bad credit but can afford the payments, you might be asked to show your last three wage slips. You may also be asked to provide your last six-monthly bank statements to highlight the healthy condition of your account.
Opting for a cheaper car doesn't have to mean you're losing out because, essentially, you still get a brand-new vehicle. What's more, having lower monthly payments could make it easier to qualify.
Ask for your credit report
Every time a hard credit check is run, it can slightly lower your credit score. However, by requesting a free copy of your credit report (which all main providers supply) and showing it to the leasing company, they may not have to run a credit check that can cause more harm.
Offer money upfront
You may be asked to pay a higher initial rental if you have a bad credit score. However, if you can pay a certain number of months upfront, qualification may be easier.
How long does it take to improve your credit score?
Every credit record is individual, so how long it takes to improve it depends on your unique financial situation. Sometimes, it may take a few months, but in other cases, a few years.
For example, Experian highlights missed payments, defaults, and CCJs stay on your record for six years.
Where can I lease a car with bad credit?
There are several options if you're looking to lease a car with bad credit. At Leasing Options, our account managers are available to help you find the best solution.
With any of our arrangements, we work to assist you, from finding the right car for your needs to managing expectations on application success. In addition, some of our funders accept individuals with poor credit, so leasing is not out of reach if you're looking for a new car.
For more information on car leasing with bad credit, speak with our team.
Can I lease a car with CCJs?
Applying for car leasing finance is more challenging if you have a CCJ on your credit record. However, in some cases, it’s not impossible. Financial defaults and court judgements stay on your record for six years, so this can affect future credit applications.
What should I consider before leasing with bad credit?
There are several things to consider if you're thinking about leasing with bad credit, such as:
The main factor to consider is whether you can afford the monthly payments over the contract period. Your credit score may give some reference to this. But, in reality, you will need to determine whether your income and circumstances suit this type of finance.
If you have a specific model or brand in mind for your lease car, it&Apos;s important to manage your expectations. Those with poor credit may still be able to lease a vehicle, but choosing a cheaper car may help your application.
Paying more upfront
If you have bad credit, you may be asked to pay a larger initial rental upfront. This could help your application as it presents less risk to the finance company. But the payment will typically equate to between nine to 12 months instalments, which may be costly.
Can I lease a car with no credit?
Some people have no credit, for example, a younger driver living with their parents, which means there is no significant financial history to look back on. This means many face challenges when applying for finance. If you're in this situation, there are options to help you with a successful car lease application. This includes:
Proof of income
Your income must be at a level where you can comfortably afford a lease vehicle, and you'll need proof of this
Proof of address
Living at the same address for over six months helps to provide a consistent address history
Showing consistent employment improves your chance of a successful application
If you have smaller payments on your credit report, such as phone bills, ensure these are up to date, as defaults will affect suitability
Drivers with no credit history may benefit from having a co-signer on the agreement to take responsibility if you do not keep up with payments
Can I use a guarantor if I have no credit history to lease a car?
Everyone's financial position is unique, and every funder we use has different criteria. For example, some have a facility for a guarantor, and some funders don't. The best way to find out is to speak to an account manager, and we can help you find the right deal for your circumstances.
Can I get a car lease without a credit check?
All reputable leasing companies run credit checks on prospective customers – it's a stipulation for all FCA-regulated finance providers. So, you will need to be upfront about yours when looking to lease.
Credit checks are required because the finance company needs to know your financial history and whether you'll be able to meet monthly payments. Most successful applications require a good or excellent credit score. However, if you have issues with your credit rating, there are other ways to assure your leasing company you can pay. Chat with an account manager on the best solution for your circumstances.
Does a car lease appear on a credit report?
Any monthly payments you make as part of a hire agreement will appear on and affect your credit report. As car leasing involves monthly payments (similar to a loan) over a period of time, it will count towards calculating your credit score.
Keeping up to date with your lease agreement can also help your overall credit rating. In addition, it shows you meet your financial obligations and may help you get finance for other things (such as loans or a mortgage) in the future.
Does leasing a car help your 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 – sometimes months or years.
At first, a new lease contract may have a negative effect on your score. This is simply because more credit is being placed on your credit file. But as long as you continue to pay the monthly instalments on time and without any issues, this should gradually improve your credit rating.
In turn, this should make it easier for you to request credit from other organisations in the future – and end up with a better deal next time.
Can a car lease make my credit score worse?
Leasing a car is a serious financial obligation. If you cannot make your car lease payments on time, as with a loan or any other repayment scheme, this will negatively affect your credit score.
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