Credit Rating for Car Leasing

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Credit Rating

Credit Rating

Thinking about leasing a car? Are you credit worthy? What can you do to ensure you are eligible?

After weeks of searching the internet, reading reviews and test driving numerous cars at your local dealers. Then you are ready to finally take the plunge and lease a car. You begin filling out an online application form to apply for your new car but WAIT… You have put so much research into the MPG’s of the car, choice of alloy wheels and of course that it must be in that lovely silver colour you saw at the dealership but have you looked at the most important aspect of the lease… Your credit file?!?

The most competitive car leasing deals are of course based on the fact that you have a good credit file. The reason behind this is finance company are in essence letting you lease car worth a considerable amount of money, they need to be certain that it is a low risk lend forthem and you can keep up with the monthly payments. So what makes a up your credit score and how can you look to improve yours?

Let’s start with the basics

5 Factors That Make Up Your Credit Rating

Payment History

This is the history of all your payments made or not made in some cases. This can have quite a detrimental effect on your score if you have missed numerous payments. Be sure that if you do miss a payment that you contact the company and pay it as soon as possible as a missed payment will continue damaging your credit score until settled.

Amount Owed

This is the amount you owe overall, the common misunderstanding about this segment of your credit history is that what matters most is the amount of revolving/available credit and not so much the amount you owe. You could have a credit card with a £10,000 limit and you have only used £500 which is only 5% of your available credit. It is better to owe £10,000 with only 5% used than to owe £1,000 with 90% of your available credit used up.

Length of Credit History

This is just purely based on the length you have held your credit accounts. The longer you hold them the better as it shows the lender that you haven’t needed to apply for more credit but instead you have just run and kept your existing credit accounts. If you finish paying a credit card off then it is actually beneficial for you to keep the account open as this will just keep increasing the length of your credit history.

New Credit

This is to do with opening new credit accounts or have existing credit accounts checked to increase the limit. As stated in the previous point it is in your interest to keep and maintain your existing credit accounts rather than opening new credit accounts as this will only damage your score. If you need to apply for more credit this is possible but just bear in mind that it will have a short term affect on your credit score.

Types of Credit

There are numerous types of credit including; credit cards, loans, mortgages and retail accounts. It can be looked at as a positive that you have a couple of different types of credit accounts but don’t take out different types of credit on the hope that this will improve your score as on the flip side it can affect your score for having too many types of accounts.

When you are looking to take out your next car lease you need to take all of the above points into account but at the same time don’t get so wrapped up in your credit score as this is just something a credit reference agency is giving you on the basis of what they can see on your file. 

Clear and Traceable

This is a huge aspect when you are being credit scored because if the underwriter can’t find you then they can’t grant you a credit line. You can sort this out by making sure you are on the electoral roll at your current address and this is the easiest way to find you and you will be on the electoral roll year on year. Also it helps if you have at least one credit account like a mobile phone contract as this links you to your address.

Homeowner or Long Term

Underwriters won’t discriminate against you if you don’t own your house but it does help massively in their decision because if you were to default on your lease they have something to come after you for financially because you own your home. It is very helpful to be a long term tenant as this just shows that if you were to default they know where you will be where as if you have a chequered past moving from house to house you would be more difficult to trace.

Employment and Affordability

It makes the underwriters decision a lot easier to make if you have been employed by the same company for a number of years and you have a steady income. The last thing they want to do is grant finance for a car lease to someone that is constantly changing jobs and doesn’t have a steady and secure income. Affordability is also a big part of their decision as they need to make sure you can keep the payments up though out your contract, the underwriters may ask to see 3 months pay slips to help with their decision.

In summary there are a lot of aspects to look at when you decide to lease your next car but by no means should this put you off. You need to be aware of the criteria and you need to realise that constantly applying via different companies is only going to hurt your credit score. You are better off working on repairing your credit report and then applying for a car lease when you feel the time is right. You will always get a better deal if you have a better credit file so take all the above into account before jumping head first into your next lease.



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