Like credit cards, phone contracts and anything else you pay monthly, leasing a car will affect your credit score. Don’t be put off, though – if you make the repayments on time every month then it might improve your score. If you can show that you can pay promptly, it’ll reflect well on you – a higher credit score will likely get you better deals on mortgages, car insurance and credit cards.
To credit companies, a lease deal is the same as a loan, except the ‘loan’ amount on your credit file is equivalent to the sum of the lease payments, rather than the value of the car.
Check out our other leasing guides for more information:
- Should you buy or lease your car?
- Advantages and disadvantages of leasing
- What are the extra costs of car leasing?
- Leasing jargon buster
- What happens at the end of a lease?
- Should you lease your car through a dealer or a broker?
- Why is business leasing cheaper than personal?
Can I lease if I have a bad credit score?
It depends on how bad your credit score is and whether you’ve missed payments before, but in most cases you should be able to, even with a less-than-perfect score. There are credit companies and lease companies that specialise in people who don’t have a great score, so don’t lose hope if you’ve been rejected by a dealer or broker.
You’ll always be credit checked for a lease, so expect to be asked information about your earnings and, sometimes, outgoings.
Once you’re accepted, it’s likely that having a bad credit score will push up your monthly payments because you’re higher risk. It might seem strange that you’ll be charged more if the leasing company is unsure if you’ll be able to afford it, but that is one thing you’ll have to bear in mind.
Why is a credit check carried out for leasing a car?
A credit check is carried out so the leasing company know you’ll be able to make the repayments. It’s the easiest way for them to determine whether you will make the payments.
Your credit score covers the past six years and includes a lot of information about your financial history, including how many accounts you have, overdrafts, electoral roll information and whether your details have been fraudulently used.
While they’ll probably take all of the above into consideration, lenders will scrutinise any missed or late payments and whether your information matches what’s on the credit report.
Using a guarantor on a car lease
You might be able to use a guarantor on a car lease if you have a bad credit score but know you’ll be able to make the monthly payments. A guarantor is someone who will have to make the payments if you can’t, so it’s a big responsibility and normally falls to a parent or family member. The guarantor must 21 or older, have a strong credit rating and not be financially linked to you.
Using a guarantor could mean you’re charged less interest than if you don’t have one.
Save money on your next car
Configure a car through carwow and we’ll find the best leasing deals on your ideal car. If you’re undecided whether to lease or buy, read our guide to both.