Believe it or not, leasing a car can prove an effective way by which you can improve your credit rating. However it should be noted from the beginning that improving a credit rating, especially a poor one, will not be achieved instantly by leasing a car, it will take time! However by consistently demonstrating that over a period of time that you can be responsible in meeting your lease repayments will reflect positively on your credit rating.
What are lease repayments?
Essentially, from a credit standpoint, lease repayments are not dissimilar to a car loan. When a car is leased the individual doing so agrees to pay a fixed amount of money on a monthly basis for a fixed period of time, until the lease expires. It is perhaps a little known fact that up to 35% of an individual’s credit score rating is attributed to their repayment history. Therefore leasing a car and meeting the payments can have a massive impact on improving your credit rating.
However, this works both ways! If you were to miss one or more of your lease payments then this would reflect badly on your credit rating. The key thing to bear in mind is that the longer you successfully repay your lease payments for the greater
the improvement to your credit rating.
Amount of payments:
When a leasing agreement is established on a car the creditor typically provides an overview of how much is owed and the period of time the repayments will continue for. Car leases are treated as separate from credit cards, which are considered revolving accounts. Instead car leases are listed as instalment accounts. This has additional benefits from a credit rating perspective, it means that the greater the amount paid against the outstanding lease, the greater the improvement to an individual’s credit rating.
Another way in which a car lease can increase your credit rating is due to the fact that an individual gets an increase in their credit if they vary the type of accounts they open. Therefore if your only current debt is a revolving credit card debt, merely opening an instalment account and adding it to your history will increase your rating!
Square 1 Leasing offer a range of leasing options on one of the most expansive range of cars currently available in the UK. For more information visit our website, or speak to one of our dedicated customer service agents by calling 01925 530 159 or by email to firstname.lastname@example.org .
Posted on 11th February 2015 at 9:39 AM