Can I lease with a poor or bad credit score?
If you’re looking to drive a brand new or nearly-new vehicle, then personal contract hire is one of the easiest ways to get behind the wheel cost-effectively.
The fixed monthly payments can be kept low because you’re effectively renting the vehicle, typically for 2 to 4 years. At the end of the contract, you simply hand the car back.
Personal Contract Hire is a form of finance you will need to apply for, and you need to be credit checked before the finance provider decides to accept or reject your application. The downside with leasing is that you’ll normally need a strong credit rating to be accepted by the financial provider in the first place.
If you have a poor credit history, you might not find it so easy to take advantage of the available vehicle leasing deals. Keep reading to find out more about how your credit score can impact your vehicle leasing finance application.
What is a credit report?
Credit reports are compiled by the three UK credit reference agencies – Experian, Equifax and TransUnion and the credit report provide information from your current and previous financial providers about the types of credit you’ve had, how much you owe and your repayment history.
Typically, a credit report will normally hold the following information:
• A list of your credit accounts, which include credit card accounts, loan arrangements, mortgage arrangements and utility company debts
• Whether you’re on the electoral register
• Your name and date of birth
• Your current and previous addresses
• If you’ve committed fraud or someone has stolen your identity and committed fraud
• Your current account provider – but only details of overdrafts
• Public record information such as CCJ’s, house repossessions and bankruptcies – these stay on your records for at least 6 years
• Details of people who are financially linked to you, for example, you’ve taken out a joint arrangement such as a mortgage
Lenders will only be able to look at your credit report if you have provided them with permission to do so.
What is a credit score?
Everyone over the age of 18 in the UK is assigned a credit score to indicate their creditworthiness.
After looking at all of the above information in the credit report, a credit score is calculated, which is a numerical representation of your credit behaviour and how likely you are to keep up with repayments.
Each credit reporting agency uses a different method to arrive at a number, but scores are usually split into 5 bands ranging from very poor up to excellent. The higher your score, the more likely you are to get a credit application accepted.
What credit score do I need to lease a car?
When you submit the finance application via our site to a lender, they will approach at least one of the three UK credit agencies – Experian, Equifax or TransUnion – to check your credit file. Most of our lenders ask for a ‘good’ to ‘excellent’ credit score for a customer to be accepted for vehicle finance.
Please note that the financial providers we partner with don’t use the credit score alone to approve or decline your application.
Other important factors such as your credit history showing that you make regular repayments on time and what other debts you have all play a part in the decision.
Why might I be refused credit?
Some possible financial red flags which could lead you being refused credit include:
• Frequently setting up new accounts
• Being at your credit limit
• You have late or missed payments, defaults or CCJ’s in your credit history
• You have made multiple credit applications in a short space of time
• You’re financially associated with someone who has a bad credit history
• Your employment history – recent employment and salary information is a good indicator of stability
What if i have been turned down for credit?
If your credit application is refused, you can ask the lender why they turned you down and if it was due to your credit report. They should tell you if your report was a factor and the credit reference agency they used to retrieve it, but they may not give you details as to why you were refused credit.
You have the right to challenge the credit reference agencies and appeal their decision if you think that the information they hold on you is incorrect or if you think they turned you down for credit unfairly.
You can begin the process by first obtaining a copy of your credit file. If you believe there are errors on your credit report, let the agency know immediately.
Explain to the credit agency why you think there are mistakes and provide any evidence where possible.
You may also need to supply further documentation to support your appeal, such as copies of bank statements.
If you have been refused credit, you might be thinking about making another credit application soon after. You should hold off for a while and try to resolve any issues that might have caused the rejection.
Even if you have been declined credit, depending on your circumstances and which financial provider it is, you might be able to apply for a joint application with a family member or a spouse. In this instance, both applicant’s incomes are combined, and both parties are responsible for the monthly payments.
Please note that you can only make a joint application with someone living at the same address as you. Whether the application is successful or not depends on the credit score and income of both applicants.
It’s important to know that if there’s a split between you and your partner before the end of the lease agreement, the payments have to be made – otherwise, it could result in the credit score of both parties being adversely affected.
For any questions about vehicle finance or if you’ve already been declined for credit, please call one of our Sales Managers on 02392 245570.
Can I lease a car if I have an Individual Voluntary Arrangement (IVA)?
If you have been declared bankrupt, or have a County Court Judgement (CCJ), or you have entered into an Individual Voluntary Arrangement, it’s unlikely that you will be accepted for vehicle finance.
Events such as these leave a record on your credit file for up to 6 years. However, unlike a criminal record, a poor or bad credit record won’t follow you around for life.
Providing you make improvements to your credit score, you will stand a better chance of being accepted for vehicle finance in the future.
How can I increase my chances of being accepted for credit?
• Minimise the number of credit applications you make – aim for a maximum of one to three every 3 months
• Register yourself on the electoral roll by registering to vote, as this helps lenders confirm your identity
• Make repayments regularly
• Pay off as many debts as you can
If I’m a young driver with little credit history – can I still apply for finance?
It might not be easy getting accepted for car or van finance if you have little to no credit history. Financial lenders would rather lend to more established borrowers, as they can better assess their record for repaying debt.
To lease a vehicle with Fleet UK you must:
• Be 18 years or more
• Have a full driving licence (provisional licences are not accepted)
• Hold a UK bank account
• Have a regular monthly income
• Be a UK resident
• Be able to afford the monthly rentals
However, if you can prove that you’re able to make regular payments – and on time, this will improve your chances of being accepted by the financial lender.
Can I use a guarantor?
Are you a young driver who hasn’t had the chance to build up a credit score yet? Or, perhaps you’re someone who hasn’t got a good credit score due to missing a few regular payments due to going through a bad patch?
If you fit into either of these categories, then the chances are that no matter whether you’re looking to lease a new car like a Fiat 500 or a luxurious BMW Series 1, you’ll struggle to get approved for car finance.
The Financial Conduct Authority (FCA) requires that all finance companies carry out a car lease credit check before signing up to a finance agreement to ensure that you’re managing your own finances.
Did you know it’s possible to use a guarantor on a car lease? A guarantor is someone who assumes responsibility for making payments if you default on your monthly payments.
The guarantor usually is a family member or a close friend – although, in the case of a business lease, it could also be a managing director.
The chosen guarantor must have the following criteria:
• Be at least 21 years old
• They must not be financially linked to you
• They must have a strong credit rating
Most guarantors need to be homeowners and cannot be linked financially to the borrower – such as a spouse.
Although guarantors are extremely common in the property rental market, it’s less so in the car leasing industry, and not many financial providers will accept a guarantor. However, this is dependent on the financial provider.
Please get in touch with one of our Sales Managers on 02392 245570 to check if you can use a guarantor in your finance application.
If your guarantor also falls behind in making the monthly leasing payments, it could affect both of your credit scores.
Will my guarantor get credit checked?
It’s important to note that when applying for guarantor car finance, your guarantor has a good credit score to ensure they can keep up with the monthly payments on your leasing agreement if you default.
It’s worth asking your guarantor to check their credit score and credit history with a credit reference agency such as Equifax, Experian, or TransUnion to ensure that all their information is up-to-date and correct before submitting a finance application.
Can someone else lease a car on my behalf?
This is sometimes called ‘Accommodation Finance’. While technically it’s not illegal, it usually involves not declaring that the person taking out the lease is not the primary driver – and that is illegal, which could result in the applicant and yourself being charged with fraud.
In recent years, finance companies have become very sensitive to accommodation deal agreements, and they are on the lookout for these arrangements.
Accommodation finance is prohibited by finance providers because there’s an increased risk of the finance provider not getting the car or their money back if there’s a contract breach.
It’s worth checking the accommodation finance rules before applying for vehicle finance, as most financial providers won’t accept it. Please call us on 02392 245570 to discuss your options.