Before you can drive off the lot in a leased vehicle, you must first fill out an application and earn approval for your lease. In order for your lease application to be accepted, you likely need favorable credit history. To learn what score is needed to lease a car, continue on.
What Credit Score Do You Need to Lease a Car?
According to NerdWallet, the exact credit score you need to lease a car varies from dealership to dealership. The typical minimum for most dealerships is 620. A score between 620 and 679 is near ideal and a score between 680 and 739 is considered ideal by most automotive dealerships. If you have a score above 680, you are likely to receive appealing lease offers. However, if your score is below 660, you still have a 22 percent chance of earning acceptance.
Before You Go Shopping
- Build your score
- Reduce balances on credit cards
- Pay bills on time
- Keep credit accounts open
- Check credit reports for errors
Build Your Score
If you are worried that your credit score may stop you from getting the lease you want, build your credit score.
Reduce Balances on Credit Cards
One of the quickest ways to raise your credit score is lowering your credit card balances. Pay off as much of your credit card balances as possible. A high credit card balance can negatively effect your score. A balance of less than 30 percent of your credit limit can help you get to a more appealing number, per Nerd Wallet.
Pay Bills on Time
Student Loan Hero says that no matter what, pay all of your bills on time. Pay your credit card bills, utility bills, phone bills, etc. on time to show you are responsible with your finances. On-time payments will reflect positively on your credit score.
Keep Credit Accounts Open
Keep all of your credit accounts open unless you absolutely need to close them. One reason you may close a credit account is because there is an annual fee you cannot afford. Otherwise, keep these accounts open because the longer an account is open, the more positively this account can reflect on your credit score.
Check Credit Reports for Errors
It is possible that your credit report contains errors. Keep track of your credit history and check your personal records with the records in your credit report to make sure everything adds up.
What Are the Car Lease Requirements?
In order to gain approval for a car lease, you may need a favorable credit score. A score at or above 680 is likely to help you gain approval for a lease. A score below this number may cause you some difficulty during the application process. Many lenders look at credit score numbers that are specifically related to automotive loans to gain a stronger understanding of your auto loan history.
What Will Happen If You Have a Credit Score Below 680?
- Higher payments at signing
- Inability to lease
- Leasing a used car
Higher Payments at Signing
Just because your credit score is below 680 doesn't mean you won't be approved for a lease. However, you may have to pay more at the time of signing. You may also have to make higher monthly payments ranging from an extra $10 to an extra $125.
Inability to Lease
It is also possible that you will be turned down for a lease if your credit score is below 680. If you have a lower credit score, you should also have a backup plan.
Leasing a Used Car
Leasing a used car is an option for those with lower credit scores. It may be easier for you to gain acceptance if you apply for a used car lease.
Does Leasing a Car Build Credit?
Yes, leasing a car does build credit. Leasing a car and buying a car affect your credit score in the same way. It helps to lease or buy a car because this adds variety to your credit history. A credit mix can raise your credit score. A credit mix is when you have loans and credit cards. When you show you are financially responsible with different kinds of loans, your credit score can increase. Paying for your lease on time every month can also raise your credit score.
What Is a Lease?
A lease is essentially a long-term vehicle rental, according to Prevent Loan Scams. Leases vary from dealership to dealership, but, for the most part, dealerships lend you a vehicle for an extended period of time, requiring you to make monthly payments during the duration of the lease period. You do not own the car you are leasing, so you must follow the lease agreement rules. One common rule is you cannot make drastic changes to the vehicle. You must also stay within the mileage limit when driving a leased vehicle. At the end of your lease agreement, you must turn in the vehicle back to the dealership. However, you have the option of buying your vehicle after the lease runs out.
What Can You Do If You Have No Credit History?
Without a credit score, lenders have no way to determine if you are financially responsible, which can land you in a heap, according to The Balance.
- Ask a relative
- Nontraditional approaches
- Shop strategically
- Drive a bargain
Ask a Relative
A co-signer signs your lease to help you build your credit. If you miss any payments, this negatively affects your co-signer. Keep this in mind and seek a friend or family member who is willing to take a risk with you. You also want to find a relative with a favorable credit score. Individuals with lower credit scores may not be able to co-sign for you.
Nontraditional Approaches
There are other ways to get a lease deal. For example, Experian says you can have a lease swap. This is when a lease that belongs to one person is transferred to you.
Shop Strategically
If a dealership has a vehicle on its lot for a long time, they may start to get desperate. This desperation can lead you to a lease deal. Typically the end of the year is the best time to get a deal on a lease because dealerships are preparing for the release of their new year models.
Drive a Bargain
Even if you think you've found the best lease deal, see if the dealership is willing to negotiate. You can try and talk down the monthly payments or negotiate a lease length that is more suitable for your needs.
Sources:
https://studentloanhero.com/featured/what-credit-score-is-needed-to-lease-a-car/
https://www.nerdwallet.com/blog/finance/credit-score-need-lease-car/
https://www.preventloanscams.org/car-lease-credit-score/
https://www.thebalance.com/is-your-credit-score-high-enough-to-lease-a-car-4156425
https://www.experian.com/blogs/ask-experian/can-you-lease-a-car-with-bad-credit/
