Just like with any repayment finance agreement, having a car lease will appear on your credit report. Although this may initially sound like a bad thing, – it can actually have a positive effect on your credit score if done correctly. Below is everything you need to know about using car leasing to build up your credit.
How do I Lease?
There are some great options online for those of you who are looking to use leasing to improve your score. Taking advantage of these personal car leasing offers could be exactly what you need to have the kind of credit report you can be proud of. They have cars to suit all kinds of budgets and will put you on the right track.
How Does Leasing Affect your Score?
Just like a loan, a car lease will affect your credit score. It is effectively considered the same as a car loan. Around 35% of your score is based on the regularity and reliability of payments – and that’s exactly what leasing is, payments. Another 25% of your score is the length of your credit history and how many enquiries or new debt you have accrued in that time.
How Can It Positively Affect my Score?
The reality of the situation is that it will likely have a negative effect on your credit score before it improves it. However, this will only be short term if you make sure you handle the “loan” correctly. This means making payments on time without exception. It can be a particularly useful tool for young people who don’t have much of a credit history and looking to build up a high score.
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As it’s an installment amount, it could automatically improve your credit score simply by appearing on your report. Around 10% of your report is the kind of credit you have – so having some varied accounts open could result in an improvement. A credit card is a revolving account, so adding in an installment account could be a good mix.
Can the Length of the Lease Affect my Rating?
The length of time you have taken your lease over isn’t necessarily directly relevant to your score. It may affect the rate of charge though. The leasing company will report how much you owe them, and as this could be quite a large figure, it will be considered as an installment account – and is known that you will have to pay it over a certain period of time.
The more of your lease you pay off, the more your credit score will improve. It may be if you are paying it off over a longer period of time, that it will take longer to see a difference. So, although there will be no direct impact, the process could take a bit more time. This doesn’t mean you go for a shorter term if you can’t afford the increased payments – this in turn could have a negative effect.