Just as lenders have certain criteria for lending you money, a new car lease usually requires good credit for lease approval. Even if your credit is bad a lease option may be available to you.
Your credit score is a three-digit number ranging from 300 to 850. Every consumer is scored, with MyFico looking at a number of factors including: your payment history, amounts owed to creditors, the length of your credit history, the age of your credit, and the types of credit used. The higher your score, the better. A score of 700 or higher reflects “good credit management” according to Experian.
The definition of what constitutes “bad credit” is not always clear. Any score below optimum levels means your lease terms will not be as generous as the person who has excellent credit.
Credit scores below 620 are typically considered “subprime” and include consumers with bad credit. Thus, the lower your score the deeper in subprime territory you are.
Raise Your Score
Obtain your credit score from MyFico.com. If your score is below 620, consider working on raising your score before applying for a new car lease.
You can raise your score by consistently paying your bills on time. Also, if you have excess debt, work on reducing what you owe to a more manageable level. It may take three to six months of diligent work to raise your score. Once your score is out of subprime territory, you can apply for new credit.
Even with bad credit you can sometimes obtain a car lease by putting more money down. Most leases require consumers to put no more than 10 percent down when leasing.
If you put down at least 20 percent you might be approved for a bad credit car lease and at a lower interest rate. You can also discuss your leasing options with different creditors, not just the one supplied by the new car dealer.
Seek a Co-Signer
The last resort for car leasing is to seek a co-signer. This person will need to be willing to put his or her name on the lease contract and will be responsible for making payments should you default your lease.
Cosigning a car lease won’t do nearly as good a job of raising your credit had you signed the lease in your name only. However, a co-signed lease agreement can make new car leasing possible for the bad credit borrower.
You may decide that leasing a car is not right for you if the options listed here are not suitable. An alternate route to take is buy a used car, make payments on time and pay that loan off successfully. In doing so you build up your credit and put yourself in a better position to obtain a car lease later on.
See Also — How to Buy a Home With Bad Credit