You can lease a car instead of paying the total price of the car upfront. All you have to do is to go to the showroom and select the car whose monthly installment you can cover and start the leasing. However, when you apply for a car leasing the bank or the lending institution is going to have a look at your credit score.
Your credit is the measure of your creditworthiness. It shows that whether you have been able to manage your credit properly and with responsibility or not. It is measured in the score range of 300 to 850. The credit score of 300 is the lowest that you can achieve, and 850 is the highest credit score that you can achieve. Higher the score, better is your chances to get the best available credit financing offer in the market.
For the car leasing, you can get the offer if you have an average to excellent credit score. Moreover, your credit score might not play a major role in the approval of car leasing request. However, your credit score will affect the kind of offer that you get for the car leasing. You might be paying the high interest rate for bad credit score.
Explanation of credit score ranges
It is important to know the category that you fall into when it comes to credit score for you to be aware. The range of a credit score can go from 300 to 850. Always remember that the higher your score, the higher the chances of you to qualify for a loan. There will also be instances where a financing company is okay with 650 scores, while the other is fine with a 750 score. It will all depend on the lender itself.
A lender or a bank will check your credit score if you qualify for the application that you are requesting. Here are some of the credit score ranges that you should know.
Bad credit score
People with a credit score below 579 is known as high risks. Foreclosures, poor payment history, and bankruptcies are the reasons why people fall into this category.
Good credit score
A good credit score ranges from 680 to 719. People with this credit score can expect approvals and interest rates that are better.
Very Good
A very good credit score ranges from 720 to 799. People with this credit score is known to be small risks, and they often get loan amounts that are higher than usual.
Excellent
An excellent score ranges from 800 and above. Financial freedom is expected to people with this score.
How are credit scores calculated?
The weight of each of the five categories are; 30% of amount owned, 10% is for the new credit, 15% accounts for the length of credit history, 10% is the credit mix and the last 35% accounts for the person's payment history.
The FICO score takes into consideration positive as well as negative aspects of the credit report. The percentage or the weight of any of the categories mentioned above may differ from a person to another depending upon the information available in the credit report.
The FICO score takes all of the information from your credit report. However, the banks or any other lending institution might look at your income, type of credit and employment history when you apply for a loan or mortgage.
Once a certain lender asks for a client's credit report, they can also ask for the Fico score. Other sources say that your Fico score will include 35% of your payment history, 30% of your credit utilization, and 15% as to how long have you been borrowing.
Car leasing options based on credit score
It is always cheaper to lease a car because of the small payment that is due monthly and the flexible requirement for credit scores. But before applying for a lease, it would be best to do the tips below.
Credit Score Checking
Before leasing a car, it would be best to check your credit score. This will give you time to fix any mistakes in the report that can affect your score. It will also give you an idea about your chances of getting approved.
Check Your Budget
Check if your budget can cover the car lease that you are eyeing. In this way, you'll be sure that you can pay off the lease monthly.