Do you need good credit to lease a car?

Firstly, yes you will be subject to a credit check when you begin the process of leasing a car. This is carried out by finance companies to make sure the person they’re leasing to can make the monthly payments. It’s a common practice in any agreement where goods and services are provided in return for regular payments. But can credit affect your ability to lease a car in the first place?

In this blog, we’ll be taking a close look at credit checks and how good or bad credit can influence the lease of a car.


What is a credit check?

When you make an application for a car lease, the leasing company will carry out a credit check. It’s a requirement outlined by the British Vehicle Rental and Leasing Association (BVRLA) and Financial Conduct Authority (FCA). As such, you won’t find many lease companies that don’t carry out credit checks.

Credit checks are typically done through a Credit Reference Agency (CRA). Drivers can even check their own credit score ahead of time using the same services. There are two options when it comes to credit checks:

  • Soft credit check – designed to confirm the applicant’s identity and uses basic details to assess eligibility. It only examines select information as a result.
  • Hard credit check – takes someone’s entire spending history into account, along with the points above. The results of a hard credit check can stay on you record for up to six years.

​Credit checks are conducted for the purpose of getting a sense of a person’s financial situation and determining whether they can make required monthly payments. To this end, a credit check will look into some or all of the following:

  • Any outstanding debts.
  • Personal information such as contact details, address, and date of birth.
  • Declarations of bankruptcy.
  • If you’re on the electoral roll.
  • Any late or missed payments on past accounts, credit cards, and loans.
  • Any repossessions.
  • Details of any Individual Voluntary Arrangement (IVA) if present.


How long does a credit check take?​

The credit check itself does not take very long to produce a report. Automation software is typically used to gather all the relevant information in minutes. However, it can take far longer for a judgement to be reached on the results of a credit check. This is because the credit report must be checked manually.

This process often takes a day or two, although it can be extended due to other factors like illness and holidays.


What is a good credit score for car leasing?

Car leasing companies will look at the results of the credit check to determine someone’s eligibility. The resulting credit report can contain lots of information. However, the most significant is the score. This three-digit number serves to indicate future credit behaviour. The higher the number is, the better at borrowing someone is.

For securing a car lease, it’s recommended that applicants have a credit score of around 800. In other words, a fair to good credit history. However, this is just a guideline. Each lender will operate with different criteria regarding minimum acceptable credit score. There can also be variations due to the credit reporting used by the lender. 


Leasing a car with bad credit

Even if you have a substandard credit score you shouldn’t be put off from car leasing. This is because making the monthly payments can actually boost credit by demonstrating financial responsibility. It is possible to lease a car whilst having bad credit, although with a few extra steps.

Options for leasing a car with bad credit include:

Increased up-front payment

All car leases require an initial payment before the driver begins the monthly payments. Paying more at the start reduces the risk for the lease company, as they’ve already received a large portion of the total lease revenue. For the individual, paying more initially often means less is paid each month.

Opt for a short-term lease

You’re more likely to be accepted for a lease that lasts for a short time. This is because there’s less risk of accident, damage, or opportunity for the driver to miss a payment.

Consider vehicle type

Vehicles with lesser overall value often come with reduced initial and monthly payments. This makes them easier to lease, again due to lower risk to the company.

Get a co-signed agreement

This isn’t always an option, though some companies will let two drivers feature on the same lease agreement. In these cases, credit scores are shared. So, if one person has bad credit it can be offset by the other signee.  

Improve your credit

It sounds easier said than done but there are practical steps you can take to boost your credit score. Our advice is to limit the number of credit checks. This can be easily achieved by asking for a copy of your most recent report.

Local car hire Consett

The Croxdale Group stocks a wide range of vehicles for lease so you can choose the one that fits for you. This includes Citroen, DS, Peugeot, Volkswagen, Vauxhall, Suzuki, Toyota, and MG vehicles. We have the flexibility needed to ensure you get the lease that works for you, even if your credit is unfavourable. If you’re looking for car hire Newton Aycliffe, feel free to pop into our nearby dealership to discuss credit eligibility. Otherwise, you can contact us online and we can help you there.