When you want to lease a car, you will have to go through a credit check. This is where they check your credit score and determine whether you can lease a car.
This will be done by every reputable vehicle broker and everyone is subject to one. Having your credit checked is one of the most important things about leasing car, and we think that it’s important that everyone understands the importance of a credit check during the leasing process.
So in this article, we are going to look at the importance of credit checks, whether you can lease with bad credit, and how to increase your credit score.
Why do I have to have a credit check when leasing a car?
Quite simply; a credit check is the best way for the finance house to know whether you can make the monthly payments or not.
Your credit score will show the underwriters whether you will be able to make the payments, the higher the credit score the better. Because you don’t own the car, the finance house need to know that you are going to make the payments, and the easiest way of determining that is by looking at your credit score.
As much as we are sure they would like to, finance houses can’t look at each case on an individual basis, so they do a quick credit check that is done by a computer.
Can I lease a car without a credit check?
We are going to say no. If there is a vehicle broker or a leasing company that claims that you can lease a car through them without a credit check then be very wary.
There will be leasing companies and vehicle brokers that allow you to lease if you have a bad credit score, but they will still have to do a credit check.
We do not recommend you go through a leasing company that offers no credit check as they may not be reputable. You can read more about how to spot a reputable vehicle broker here.
If you do not want a credit check because you have bad credit, then the best thing to do would be to find a reputable broker that offers leasing for those with bad credit and to go through them. It’s not worth risking your money or wasting your time on an un-reputable broker.
What will a credit report show?
When you look at your credit report, it will tell you a number of things. These include;
- Your name and date of birth
- Electoral roll information
- This will also provide information of your past addresses
- A list of your credit accounts including when they were opened
- This includes accounts that have been closed and settled in the past six years
- It will also have information on credit limits and loan amounts on mortgages,
- credit cards and loans
- Details of your current account overdraft
- Information about other application searches
- Whether you have missed any payments or been late repaying
- Plus how many times this has happened
- Any financial links to other people
- This means if you have applied for joint credit
- Whether you have had a history of debt problems such as bankruptcies or CCJs
- This goes back six years
- It will also include information as to whether your identity has been used for fraud
So there’s quite a lot of information on there for the underwriters to go through.
What will the lenders look at when looking at my credit report?
Okay, so do underwriters really look at all of that? They could well do. However, the main things that they will be looking at are your missed payments, if you have a history of debt and the amount of credit accounts you already have. They will also look at whether you are on the electoral roll and whether this matches up with the information that you have already given them.
Lenders will have their own scoring system as well, so they will judge your credit history against their credit rating system and then decide whether you can be approved for finance or not.
Where can I check my credit score?
You can check your credit score online and there are quite a few websites you can do this on. We at OSV use Experian most of the time, but there are others.
Be warned though, many credit check websites charge you after one month. You can sign up for free and see your credit score there and then for free, but once your first month is up you will find yourself being charged. You can, however, cancel your membership at any time. So if you really wanted, you could sign up, check your score and immediately cancel your membership. But it is important that you are aware of that before you sign up.
Can I lease a car with bad credit?
So you’ve checked your credit score online and, unfortunately, you have a poor credit score. Does this mean your dreams of leasing a car are over?
No it doesn’t. You can still lease a car with bad credit. It will make it more difficult, however, and your choices may be more limited than they were, but there is still a chance you can lease with bad credit.
How do I lease a car with bad credit?
The key to leasing a car with bad credit is to find a reputable broker that has the experience and the resources to deal with your situation effectively and efficiently. There will be some brokers that will run a mile when you tell them you have bad credit, but there will be others who will be happy to help.
Some leasing companies specialise in bad credit, but we recommend you exercise caution. Make sure they are reputable.
Your options may be more limited when you have bad credit, and you may end up paying more monthly. This is because the finance house needs to know that you will make the payments on time, and your credit score has shown that you are a higher risk than someone with a good credit score. For more information on leasing with bad credit, you can read our article here.
Getting a short term rental
CCJs drop off your credit history after six years. So if you have six months to go before your CCJ drops off, then you might want to consider a short term rental.
Short term rentals are cheaper than daily rentals but slightly more expensive than long term leasing. However, you can rent a car for up to a year. After that time is up, your CCJ will have dropped off and you can look at getting a long term lease. You can read more about short term rentals here.
What are my alternatives?
If you have bad credit, then there are some alternatives that you might want to consider;
Using a guarantor
Your other option is by using a guarantor. This will increase your chances of getting approved for car finance.
A guarantor is someone who agrees to take on your payments should you be unable to make them. You often hear of guarantors when looking at houses, but you can also have a guarantor for your lease car. You can read more about using a guarantor here.
How can I improve my credit score?
There are some things that you can do to improve your credit score. These include;
- Paying your bills on time
- This one is obvious, but it’s the easiest way to improve your credit score
- Keep your credit card balances low
- If you have high debt-to-credit ratio then it could be a sign that you are facing financial difficulties
- Only open new accounts if you need them
- Opening too many credit accounts can have a detrimental effect on your credit score
- Open a new account
- That said, having too few is also bad for your credit score. You should have a healthy mix of accounts.
- Pay off your debt
- Another really easy way to improve your credit score is to pay off any existing debt you have.
In conclusion, credit checks are important when it comes to leasing a car because they are a sure-fire way to know whether you will be able to make the monthly payments on your lease car. Because finance houses have to carry out a number of credit checks a day, using your credit score is the best way to know quickly whether you will be able to make the payments. However, if you do have bad credit then it’s not the end of your leasing dream. You can still lease a car with bad credit.
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