Can I lease a car if I have bad credit?

Personal Contract Hire is an increasingly popular and cost-effective way of driving a new car. It is a form of finance you will need to apply for. You will need to have a credit check before the finance company decides whether to accept or reject your application.

What is a credit report?

A credit report includes all the details of any credit or borrowings you currently have, along with historic payment history. The term credit can refer to a range of financial products including; a credit card, mobile phone contract, overdraft or mortgage. The report will also include personal details such as your address, whether you are on the electoral register, and any financial associates you have. A financial associate is any person you have jointly entered into a finance agreement with.

A credit report will not check any details such as; your medical records, religious beliefs, savings accounts, employment history or ethnicity.

Lenders will only be able to look at your credit report if you have given them permission to do so.

Your credit score

After looking at all of this information a credit score can be calculated which is a numerical representation of your borrowing behaviour and how likely you are to keep up with repayments. Each credit reporting agency uses a different method to arrive at a number, but scores are usually split into 5 bands ranging from very poor up to excellent. The higher your score, the more likely you are to get a credit application accepted.

Your credit score and leasing a car

At Rivervale, we only work with funders who generally accept applications for finance from people who have a good or excellent credit score.

There are lenders who will accept applications from people with lower credit scores, but you are likely to pay higher interest. This is because lenders will often set the rate of interest for the finance product you are applying for based on how much of a risk you present. The lower your credit score, the less sure the lender is that you will keep up the necessary repayments, so the higher risk you are. As you represent a higher risk than a person with a good credit score, you will be charged a higher interest rate on your finance product and so will end up paying more overall for your car lease.

How to improve your credit score

If you have a poor credit rating and wish to lease a car, we would recommend trying to improve your credit score so you can access the most competitively priced deals.

Your credit score can be negatively impacted by; regularly missing payments on existing credit agreements, having a County Court Judgement, entering into an Individual Voluntary Arrangement, if you are using most of the credit available to you already or even if you have very little credit history or a 'thin file'. Lack of traceability by way of the electoral register will also impact the ability to obtain credit, as companies need to identify who they are dealing with, and checking public records such as these is one of the methods used.

To improve your credit score you could try the following;

  • Make sure you keep up with payments on existing credit agreements.
  • Make sure you are registered on the electoral roll: being registered at the same address for a length of time can be seen as an indication of stability.
  • Close any accounts that are unused such as store accounts or credit cards.
  • Pay off as many debts as you can.
  • Check any financial associates. If you entered jointly into a financial agreement make sure the other person's poor credit is not bringing yours down.
  • Lastly, check for any mistakes on your file. Investigate anything that doesn't look right and make sure you get it corrected.

Get more advice about your credit score from the Money Advice Service

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