The credit score plays a critical role when you apply for the leasing of a vehicle. The credit score that is calculated by the credit agencies is considered to identify your overall credit strength o the creditworthiness at that time. The FICO credit score that is most commonly used around the world has a range of the credit score of 300 which is the lowest possible to 850 which is the highest possible score.
The credit score indicates how you have been able to manage your loan or credit in the recent past and whether you have the capability to make on-time payments or not. The car dealers that are operating in a region want to ensure that their customer has an excellent credit score and also, that they can pay the amount of the vehicle plus other charges such as the interest rate applied at that time. If the car dealers see that you have a low credit score and you do not have a stable mean of income, they may reject your request for the leasing of the vehicle.
Therefore, you need to have an excellent credit score, a good track record in terms or credit payment along with a stable source of income.
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.