Can You Lease a Car with Bad Credit?

Can You Lease a Car with Bad Credit?

Leasing is becoming an increasingly popular and cost-effective way to get behind the wheel of a brand new car. However, leasing is a form of finance so lenders will carry out a credit check before they decide whether or not they are able to lease a car to you.

People may worry that poor financial management and having a bad credit history will prevent you from being able to lease a car. However, with some lenders, it is possible to lease a car with bad credit.

So even if you’ve been declined finance in the past, have previously been declared bankrupt, have completed an IVA or have had CCJs in the past you may still be able to lease a vehicle. In our guide to leasing with poor credit, we clarify car leasing financing so that you can put yourself in the best possible position before you apply.

white ford fiesta driving on a city street

What is a credit score?

When you apply for any type of finance, the lender will assess the risk you pose by going to one of the UK’s three credit reference agencies for your credit score. Your credit score is a numerical representation of the risk you pose to lend to.

Numerous factors can affect your credit score from missed or late payments to not being registered on the electoral roll. The credit agencies use this numerical representation to rank your credit score from very poor or bad to excellent.

Your credit score is usually updated on a monthly basis and can up or down depending on your changing circumstances.

Usually, those with excellent credit scores can access the best rates, the most favourable terms and have the most lenders to choose from. Whereas those with a bad credit score may be offered more limited choices and less favourable rates.

What factors affect your credit score?

As discussed above, there are numerous factors which can affect your credit score. Firstly lenders will take into account your lending history looking at how much outstanding debt you have and whether you have had any missed or late payments in the past. Credit companies look at all of your borrowing including credit cards and mobile phone contracts to overdrafts and mortgages.

Secondly, lenders will consider your personal details. Errors on your credit file can negatively impact on your credit score, so it is important to keep your details up to date.

Lenders will consider your address, whether you are on the electoral roll, any financial associations you have and your job stability. Lenders may consider you riskier if you frequently change your address or job, as you appear unstable and this can harm your credit score.

However, it is also important to remember that if you’ve never had any credit, you may have a poor credit score as you have no borrowing history. A good way to build up a good credit score in this circumstance is to take out a credit card and pay the balance off in full every month.

happy man and woman walking away from a blue ford focus parked next to a river with bridge in background

How to improve your credit score

So now you understand a little bit more about what your credit score is, it is time to take a look at what you can do to improve your credit score. The good news is, there are a number of simple steps you can take to improve your credit score:

  • 1. Keep up to date and pay any existing credit agreements on time
  • 2. Pay off any debts you are able to do before applying for more finance
  • 3. Make sure you are registered on the electoral roll at your current address
  • 4. Close any unused accounts such as store or credit cards
  • 5. Check if you have any financial associations to make sure that the person with financial links to you is not bringing your credit score down
  • 6. Regularly check that there are no mistakes on your file
  • 7. As mentioned if you have no credit history taking out a credit card and paying it off each month can help build your credit score
  • 8. However, it is important not to keep applying for finance in a short space of time, as lots of applications can make you look desperate for credit
  • You’ve been declined – what are your options?

    If you’re declined for car leasing, then it can be really disheartening, but all is not lost. You can take some time to assess your credit score, see where you need to improve (be it clearing debts or building up a more positive lending profile) and take the necessary steps to boost your credit score.

    However, for many people having a car is essential to get to work, therefore waiting and taking time to build up your credit score is not always a viable option.

    If this is the case, it might be worth considering taking out a joint application, using a guarantor or exploring the possibility of someone else applying for the lease for you. Bear in mind that all these options will only be offered by certain lenders so your options may be more limited.

    Can I make a joint application for finance?

    Some finance companies are happy to accept joint finance applications for leasing, however, there are some restrictions as to who you can apply with. Usually, you must live at the same address as the person you are applying with, and most companies will only accept joint applications with a partner or a direct family member.

    In a joint application, both applicant’s income, circumstances and credit scores are considered and both applicants are responsible for the making the payments on time.  Remember, if you apply with a partner, even if you split up you are both still responsible for keeping up the payments.

    four family members travelling inside a car viewed from the rear

    What about guarantor finance?

    Getting guarantor finance is different from a joint application as in guarantor finance, there is only one lender. The guarantor is there as a back-up and is only responsible for making payments if the lender fails to do so.

    Usually, a guarantor must have a good credit score and be able to afford the payments if you miss a payment. It is important that the guarantor understands that acting as a guarantor is a financial association, therefore any missed payments may also have an impact on their credit score.

    Can someone else apply for finance on my behalf?

    Some finance companies will approve car leasing finance applications on behalf of someone else. However, when you lease a car, the person named on the finance application must be the main policyholder of the car insurance.

    This means the person applying for car leasing on your behalf must have a valid driving licence, however, it doesn’t mean they have to be the named driver on the policy. Instead, you should be listed as the main driver and the person applying for the leasing finance on your behalf should be the named driver.

    If you list the person applying for finance as the main driver, but they are not the one who drives the car the most you could be committing insurance fraud. This practice is known as fronting and is illegal, so it is important you make sure the main driver is the person who will actually drive the car the most.

    At Stoneacre Leasing we can accept finance applications from people with all sorts of credit history so why not have a look at our car leasing deals and find the right deal for you?

    Once you’ve found a deal to suit your budget and circumstances, simply request a quote and one of our friendly team will be in touch to discuss your requirements.

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