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Taking care of your credit score is an important factor in taking out any long-term financial contract – so how does leasing affect your credit rating and what can you do to maximise it in all the right ways?
Does taking out a lease affect my credit rating?
When a finance company is asked to put an expensive asset in your hands, with the agreement that it is going to be paid for on a regular monthly basis and then come back to them in good condition, they want to know that you can be trusted. Your credit score is a perfect way to find that out.
A common type of personal leasing is with a vehicle. Personal contract hire is an excellent way to get access to a car that might otherwise be outside of your budget, and may have an impact on your credit score.
The primary credit check is important and, for a few months at least, it’s going to leave a little mark on your record. It is pertinent information to other credit agencies that you are looking for a line of credit and this is reflected in your credit report.
It’s minor, but rack up too many hard credit checks like this and it looks like you are trying to lease with poor credit, trying one finance company after another until one says yes.
What if I do need leasing with bad credit?
If your credit score is very poor, it’s unlikely that you will be able to lease. A car, or other specialised equipment available on asset finance, has significant value and the leasing companies would be remiss to accept every application without due consideration.
Spend some time repairing your credit score. With regular on-time repayments of previous credit and being able to show that you are not at your limit with current creditors, a few months may be all it needs to turn a ‘fair’ credit report into an ‘excellent’ one.
Prioritising your lease – improving your credit
Showing yourself to be a trusted customer will improve your credit rating. Leasing is an excellent way to boost a credit report. Make sure you have properly budgeted and, over the term of your finance contract, you will see a steady growth to your credit score.
Once your contract comes to an end, the dealership is going to be more than happy to supply you with the newest model of car for you to continue with them – not only can they acquire a report that shows you in good credit, but they have the experience of a fruitful relationship and nothing is worth more!
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Your credit rating will improve if you demonstrate that you are a reliable and trustworthy consumer. A credit report can benefit greatly from leasing, as it is an effective strategy to build credit.