AS WE head back to work after lockdowns and holidays, some may be on the lookout for a new car for their daily commute.
With the average medium-sized car costing £24,260 in 2021, leasing may be the best financial option – which may require a good credit score.
That maybe not always the case so to help those with bad credit improve their chances of acceptance, leasing firm, Vanarama, has created a helpful guide on building a good credit score to lease a car.
Can you get car finance with bad credit?
When a financing company considers a lease application, they look for indicators that you’re a reliable borrower, such as your income and credit score. The better your credit, the less risk you pose – improving your chances of being accepted.
In some instances, you can lease with a bad credit score, but you will have limited options, and may not be eligible for certain deals. Vanarama has created an eligibility checker tool, which can help you help you find out if you are likely to be accepted for one of their car lease deals.
What is the minimum score needed to buy a report?
Last year, Experian released a report that placed customers into the following categories, based on their credit score:
- Super prime – 781 to 850 points
- Prime: 661 – 780 points
- Non-prime: 601 – 660 points
- Sub-prime: 501 – 600 points
- Deep sub-prime: 300 – 500 points
In general, lenders look for borrowers in the ‘prime’ range and above, so you will need an Experian credit score of 601+. You can check your credit score for free on their site.
10 unique ways to boost your credit score for car leasing
- Did you know that renting can boost your credit score (if you pay your rent on time)? Simply ask your landlord to put you on the Rental Exchange Initiative.
- Dissociate yourself from previous financial partners by closing your joint accounts, as their financial habits can impact your score.
- As your payment history makes up 35% of yourcredit score, you should always pay your bills on time so that it doesn’t reflect badly upon you. Especially as a late payment can remain on your credit report for up to seven years.
- Check your credit report for mistakes and contact the credit reference agency directly to fix any that you find. If their investigation supports your claim, the information will be removed or modified, and your credit score will reflect that change.
- Check that your address is correct on older, active credit accounts as this helps prove accuracy with future credit checks.
- Never withdraw cash on a credit card as you’ll not only have to pay interest fees but this suggests to lenders that you can’t budget within your means.
- If you have a credit card, try and make two payments per month, and always pay more than the monthly minimum, as this suggests that you are good at budgeting.
- If you have old credit accounts you’re not using, don’t close them down. Though the credit history for those accounts would remain on your credit report, closing credit cards while you have a balance on other cards could knock a few points off your score.
- If you have a credit card, always stay below 25% of your credit limit. For example, if you have an allowance of £1000 on your credit score, never spend more than £250.
- Limit your requests for new credit. There are two types of enquiries into your credit history, often referred to as “hard” and “soft” enquiries. A soft might include checking your credit score or given permission for a potential employer to check yours. Whereas hard enquiries can affect your score from a few months to two years. These enquiries include applying for a new credit card or a mortgage – so keep these limited.