Find out the information on what the credit score is required to lease a car.
Did you know the credit score required to lease a car? If not, then reading the information below is essential.
For people who don't know, having a credit score is necessary for you to be able to lease a car. Typically individuals with a credit score of 700 above can easily rent a car. For people below 700, they can still rent a car for as long as they have a good payment history. Below are some of the information that you need to familiarize yourself with.
Car leasing companies are using measuring risk by checking the credit score of the person who is trying to lease. Typically, 700 is the credit score required for lease on a car. The company will also check the report that you have, wherein balances and other payments will be shown.
Restrictions for Low credit score
People who have a credit score below 700 can still lease a car, but it will usually come with a higher interest rate. There are also some instances where the company may require you to provide a security deposit.
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.
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.
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.