Why did my credit score drop after leasing a car?
Your score dropped after leasing a car due to hard inquiries. Each credit report the auto loan lender pull adds 1 new hard inquiry, and each hard inquiry lowers your score by upto 10 points or more.
There are 6 main reasons why your Credit Score can drop:
- You spent more money with your credit cards
- You missed a payment on one of your accounts
- A negative mark appeared on your credit report
- An old credit card account closed
- You paid off loans (student, card, personal, etc)
- You recently applied for a new loan or card (and a hard inquiry appeared on your report).
How does leasing a car affect your credit?
Like credit cards, phone contracts and anything else you pay monthly, leasing a car will affect your credit score. 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.
Does leasing affect your credit? Yes, initially your credit will drop but if you make regular payments then it is likely to improve your score.
Does a lease show up on credit report? Yes, like anything you pay monthly, this will affect your credit score.
Does a car lease help your credit? Yes, if you make regular 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, credit cards, etc.
Does a car lease hurt your credit? Yes, initially if you take out a car lease it is classed as a new loan 'hard inquiry' so will lower your credit score. Also, if you don't make regular payments and go into arrears, like any other type of loan it will show negatively on your credit score.
Why is a credit check carried out for leasing a car?
A credit check for car leasing is carried out because the leasing company want to know you'll be able to make the monthly repayments, a credit check is the best way to determine this so a car lease on credit report will be visible.
Your credit score covers the past 6 years and includes a lot of information about your financial history, including how many accounts you have, overdrafts, electoral roll information.
For a contract hire credit search the finance company will 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. Sometimes the lender may do a car lease soft credit check, this is pre-qualifying you for a car lease but is not actually a guarantee of being approved for anything.
Can I lease a car if I have a bad credit score?
Having a poor credit score won't stop you from applying to lease a car, however a no credit check / business car lease no credit check car lease is not an option, a credit check is required by all lenders when leasing a car.
Drivers who are looking to get into a new or near-new car but aren't crazy about high monthly payments often turn to leases as a way to get the car they want at a lower monthly rate. If you are looking for bad credit car leasing option then typically leasing a car may be difficult, but it may be easier than buying a car with a loan, especially on a new vehicle. Leasing companies ideally look for a credit score of 700 or better, however there is no guaranteed car leasing option with a bad credit score.
There may be 'no credit check leasing companies' in the market but the price of the vehicle to lease will be highly inflated.
If your credit score is low, then you may get approved on finance on a cheaper vehicle as your monthly rentals will be lower so essentially you are applying for less credit. Check out our lease deals that are under £200.