Like a credit card, personal loan or mortgage, a car leasing deal is a significant financial decision so your leasing broker will investigate your credit history to ensure you can cope with the financial demands.
During the car leasing process, your leasing broker will contact one of the UK’s three main credit reference agencies — Equifax, Experian or Callcredit.
These agencies keep detailed records on everyone in the UK, including things like past credit agreements and your repayment history. They pool this information and give people an overall credit score.
The agencies provide this information to large organisations to help them judge whether someone applying for credit will be able to pay it back.
There are a huge range of things that can negatively affect your credit score. Some of the most common ones include:
- Missed payments
- How much of your credit you use
- How many accounts you have open
- Collection accounts
- Tax liens
- Civil court judgements
These credit reference agencies rate your credit score on a five-point scale: Very poor, poor, good, very good and excellent.
Funders (the people actually buying the car and providing it to the leasing broker) will usually ask for a good, very good or excellent credit score.
What Credit Score do I Need to Lease a Car?
As I mentioned above, UK credit agencies rate your credit history on a five-point scale. As I mentioned, lenders usually require applicants to fall into one of the top three bands: Good, very good or excellent.
However, your credit score is just one factor in your funder’s decision. If you have an excellent credit score, you might still be rejected. For example, if you can’t prove that you can make regular payments, it is unlikely that you will be approved for credit.
What Should I Do If I Fail a Credit Check?
Failing a credit check isn’t the end of the world, although it does mean you might need to wait a while before you lease your car.
If you do fail a credit check, your leasing broker will get in contact to talk through your options. Now, brokers aren’t required to tell you why you failed (although they sometimes will) so you’ll often have to go directly to the credit reference agency. Most agencies will have a free trial, which allows you to sign up, check your history and cancel your membership before you’re charged anything.
Once you’ve obtained your credit report, you’ve got a couple of choices. If anything is wrong — for example, it might say you have late payments when you’ve always paid on time — you should ask your leasing broker to reevaluate your application. Most times, they will ask for additional paperwork like bank statements as proof.
Also, if anything is wrong in your credit report, you should contact the agency and request it is rectified. Since the three main credit agencies operate independently, you have to do this with each individual credit agency.
Inaccuracies in your credit report are relatively uncommon. Unfortunately, it's more common that there is a genuine reason for you to have a poor credit score.
If you have a poor credit score because of legitimate issues, there aren’t any quick fixes. The Money Advice Service has some excellent advice on improving your credit score.
Once you build your credit score back up, you can reapply for a car lease and, hopefully, pass the credit check this time.