Leasing a car can be good for your credit score – if you can manage the payments, that is! The tricky part of using an auto lease to repair your credit is qualifying for one with damaged credit.
Can a Car Lease Build Credit?
Managing your car lease well can improve your credit score because it can build a positive payment history that lasts for years – as long as you pay all installments on time. Like auto loans, both traditional and subprime, your payments are typically reported to one or more of the national credit bureaus (TransUnion, Experian, and Equifax) by your lessor.
Your credit reports generate your credit score, and your payment history makes up the majority of your FICO credit score – 35%. This category keeps track of your on-time, missed, and late payments associated with accounts reported on your credit reports. By simply staying current on your car lease, you’re boosting the biggest component of your credit score.
Future lessors and lenders are typically most concerned with your payment history when you apply for new credit since they want to see how you’ve handled loans/leases in the past. With a long-standing history of on-time payments on your loans, leases, and other bills, you’re improving your credit score and proving you have the chops to repay your debts on time. Completing installment loans also shows future lenders that you’re able to see your obligations through to the end.
However, you may not have as long to build your credit with a lease compared to a car loan, since they generally only last for 24 to 36 months. An auto loan typically offers four to eight years of payment history because you’re financing the vehicle’s entire selling price. With leasing, you’re only paying for the time you have it, which typically means a lower monthly payment and a much shorter term.
Can I Get a Lease With Poor Credit?
Most leasing companies require that lessees have a credit score of around 660 or higher. If you’re looking to get a lease car and build credit, you can increase your chances of qualifying for a lease by having a cosigner.
Cosigners let you “borrow” their good credit score to help you meet the credit requirements of lessors. They also promise to repay the lease if you become unable to – which adds security and increases your chances of qualifying.
If you don’t know anyone that can be a cosigner, then using a bad credit car loan to build your credit score may be a better route.
Auto Loans Build Credit, Too
Car loans are installment loans and can help you build a better credit score just like a car lease. Additionally, there are typically more resources for bad credit borrowers looking to finance vs. lease.
Subprime lenders signed up with special finance dealerships are equipped to work within many unique and questionable credit situations, such as bankruptcy, past repo, and lacking credit history. Instead of just using your credit score to see if you qualify for a loan, they examine the many moving parts of financial stability like your income, work history, residency situation, down payment size, and credit reports.
For borrowers with really bad credit, pursuing a buy here pay here (BHPH) dealership may be the path to take if you need a car loan right now. These dealers often skip the credit check, so borrowers that are unable to obtain traditional or subprime car loans could get behind the wheel. BHPH dealerships typically ask for your proof of income, driver’s license, require a down payment, and it’s usually a one-shop-stop experience.
Bad Credit and Need a Car? Start Here!
At Auto Credit Express, we know that improving your credit score isn’t always as easy as getting approved for a lease and paying everything on time. With poor credit, it can be tough to get approved for anything in the first place, putting you between a rock and hard place. But thanks to our nationwide network of special finance dealerships, we could help you get on the path to credit repair with an auto loan.
Complete our free auto loan request form and we’ll look for a dealer in your local area that’s signed up with subprime auto lenders.
