Does My Credit Score Affect a Vehicle Lease?
Your credit score can have a prominent impact on your financial future. By keeping your credit score in good shape, you are more likely to be accepted for a home mortgage, apartment rental, credit cards, and of course, a car lease. But if your credit score or credit history is not good then many of these financial options may not be as easily available to you, or you’ll simply have to pay interest at a much higher rate!
Simply put, a vehicle lease is a loan, where the loan amount is the total sum of payments you will make over the length of your lease, not to be confused with the value of the vehicle itself.
In this article we discuss what part a credit score plays when you come to starting a vehicle lease.
What is a Credit Score?
A credit score is the most important numeric indicator for those who are looking for loans of any kind, as it is the value generally used to measure how responsible you are with financial repayments. The question of what credit score you have usually occurs only when you face the need of applying for a new credit and want to know your chances to get the deal at better interest rates. A higher credit score indicates you are a lower risk finance candidate.
There is no plain and simple mathematical way in which you can work out your credit score, and in fact the way in which it is calculated varies depending on which credit reference agency you use.
Lots of factors can influence your credit score including:
- Personal Information – Lenders like to know as much about you as possible so they can understand who exactly they are lending to including your address, marital status, salary and whether you rent or own your home
- Credit History – The entire purpose of a credit check is to work out just how likely you are to make the required repayments back to a lender. It therefore goes without saying that one of the most trustworthy indicators is how well you have handled finance in the past, if you have historically made repayments on time as expected your score will rise, if not or you have a large amount of outstanding debt then you can expect a lower value
- Credit Enquiries – Each and every time you even apply for credit, it is noted on your profile like a footprint. This means even if you do not end up taking out the loan, the fact you applied in the first place will have an impact on your score. An example of where this could be relevant is someone who has enquired for a loan many times within a short amount of time as that could be perceived as someone struggling to pay bills and therefore seeking external funding
- Public Records – A number of public records can affect your credit score, both in positive and detrimental ways. Events such as bankruptcy can have a negative influence on your credit score whilst being on the electoral register allows a lender to quickly find your home address to ensure it is where you reside
Whilst historical information is used to calculate your current credit score, it is important to know here that the history in which they look is generally limited to around the last two years.
Car Lease Credit Checks
So now you know a little more about exactly what your credit score is and how it can be influenced, we can talk more about how a credit score plays a part in taking out a vehicle lease.
First things first, you will always be subject to a credit check when taking out a car lease so do not be surprised if you are asked the finer details of your income and outgoing payment. As the company in question is handing over a brand new vehicle ahead of any substantial money being handed over, and they need to be as sure as they can that you will make the payments back as agreed.
In an ideal world, you have a high enough credit score to satisfy their requirements and can move onto the contract agreement details with no major complications. But do not forget that in the bullet points above we mentioned that even an application can have an influence, if you apply for a lease vehicle and fail the credit checks then this will only add to the bad situation and make it harder in the future.
It is very important to therefore understand what a credit score is and how they are influenced ahead of even approaching a dealership. There are many systems available online to take a look at your score and we would encourage everyone to check prior to pursuing a new lease vehicle to avoid any further potential bad marks.
What is the Ideal Credit Score for a Car Lease?
Most “brick and mortar” lenders today only want to work with good and excellent credit.
Since generally anyone with a credit score of 750 or better can get an auto loan anywhere. A better way to phrase this question may be what credit score do I need to get a vehicle lease loan. The good news is that it can be a wide range. A person with a score in the low 700’s down through 600, should find getting a loan a pretty straightforward proposition.
When one gets to a score of 600, which generally is considered “poor” credit, its starts to get tougher. When one has a score of 500 or below, this is often considered “bad” credit and it is the hardest of all. However, I would like to quickly add that you shouldn’t get discouraged. There are many lenders and dealers on the internet with many different loan packages and it’s a matter of taking the time and having the patience to check out several until you find the one that’s right for you and fits exactly what you are looking for.
If you are applying for a vehicle lease online, there are several things that will help you be successful in using online lenders. Let’s look at a few:
- Review several websites but only once. Multiple applications will tend to be considered “duplicates” by those who receive them and often this is used as a basis for not taking the application seriously
- Read the websites carefully and be sure you are comfortable with what they say they can do. Some will look as if they tend to exaggerate their promises, I would suggest you stay away from these
- Be sure the website is secure and that the information you provide is transmitted securely
If you don’t hear back in a few days, follow up with an email to the site. For this reason it’s important to remember the site on which you applied. Remember, do not go to another site and apply until about 30 days has lapsed.
It is also a good idea to get a copy of your current credit report. That way you know for sure and for yourself what your credit status is. A current credit report is available free from any of the major credit reporting companies such as TransUnion, Experian or Equifax. One other piece of advice when applying online is to be sure and report your income accurately. This is a key determinant in whether many companies can help you. Misstating income only complicates and delays the process. Just be sure you know your monthly income from whatever sources before your start filling out the online form.
Whether it is for a car lease, a house, lowering interest rates or even identity protection, it is important to view your credit report regularly to know exactly where you stand on the credit score scale.