How Does Car Leasing Affect My Credit Score?

If you’re new to car leasing, chances are you’ll have a lot of questions about how vehicle finance may affect your credit history. 

Like any type of credit agreement, it’s important to fully assess whether car leasing is right for you. So whether you want a luxury saloon or a practical SUV, understanding the relationship between car leasing and credit scores is essential. 

To help you out, this blog dives deep into how car leasing affects your credit score, the credit score needed to lease a car, and what happens if your financial circumstances change. 

We discuss:

A credit score is a tool used by financial lenders to determine whether you qualify for a particular service. Whether that be a credit card, loan, mortgage, or car finance. 

Most finance providers use a credit reference agency to assess your eligibility for vehicle finance. The agencies use information on your credit report, along with any additional information on your application, to calculate a score between 0 and 999. 

This score helps to inform the lender what kind of borrower you are and how likely it is you’ll meet your repayments. 

In order to be accepted for vehicle finance, most providers ask for a “good” to “excellent” credit score as the minimum to lease a car in the UK. Using Experian’s scoring system, a credit score of 881 to 960 is considered “good", while 960 and above is “excellent”. 

It’s worth noting that every finance provider uses a different scoring system, so you may be refused by one lender but accepted by another. 

To determine whether you’re eligible for vehicle finance, lenders take into account various factors. This can include demographics such as your age, employment history, living situation and income, and your previous lending history. 

If you have a poor credit score, getting approved for vehicle finance may prove difficult. 

If you’ve been declined finance in the past, have been declared bankrupt, have entered into an Individual Voluntary Arrangement (IVA), or have a County Court Judgement (CCJ), it’s unlikely you’ll be approved for vehicle finance. You can read more about this in our guide, Can I Lease a Car with Bad Credit?

However, a low credit score doesn’t always indicate bad financial history. Sometimes, it can be because you have little-to-no credit history. Many young drivers, for example, have a low credit score because they’ve never taken out a credit agreement. 

If your credit score does turn out to be low, don’t be too discouraged. There are ways to improve credit score over time. Money Helper, Experian, and Money Saving Expert all offer expert advice on how to build up credit history. 

Simple things like paying your bills on time, paying off any outstanding debts, and keeping balances low on credit cards can positively affect your credit score. 

If you’re unsure whether you’re eligible for vehicle finance, use our Finance Eligibility Tool to get a clearer idea. 

You can also find out your current credit score for free by visiting Experian’s free credit score checker.  

It’s worth noting that our current finance providers don’t offer a ‘soft-search’ facility. However, Nationwide Vehicle Contracts will run through an eligibility questionnaire with you over the phone before we propose you finance. 

If I'm refused vehicle finance, will it negatively impact my credit score? 

If you apply for vehicle finance and the lender refuses, it may have a negative impact on your score. 

This is because when you apply for credit, an inquiry is added to your credit report. An inquiry indicated that you’ve applied to take on new debt, and that potential new debt represents possible risk, which can have a negative impact. 

Therefore, it’s extremely important you ensure car leasing is the right option for you financially before applying for finance. 

How will car leasing affect my credit score if I’m accepted? 

If accepted, leasing a car can be a great way to improve your credit score. As long as you pay your monthly rentals on time, it will show finance companies that you can manage your money, make payments on time, and be trusted to borrow large amounts of money. 

This in turn, can hold you in greater stead for future credit agreements. 

Sometimes, a change in your financial circumstances cannot be helped. If you’re now struggling to make the payments, it’s important that you speak to your financial provider as soon as possible. 

It may be that an early termination is the best option, or you transfer the contract to another person who can take over the outstanding rentals. 

Either way, it’s important you seek advice as soon as possible to avoid a negative impact on your credit score. 

Looking for more car leasing advice? Nationwide Vehicle Contracts has produced various guides, such as How to Apply for Personal Vehicle Finance and the Car Leasing Costs. 

If you’d like to speak to someone about finance eligibility, don’t hesitate to get in touch with Nationwide Vehicle Contracts on 0345 811 9595 and we’ll be happy to help.