Does Car Leasing Affect Credit Score?

Car leasing is a form of finance, so it will affect your credit score in the same way a phone contract or other monthly payment would. Credit reporting agencies (CRAs) see lease deals as a loan, with the amount borrowed being the total cost of the rental payments for the car.

Want to know how leasing can work in your favour and improve your credit score? Read on to find out how you can make the right financial choices when choosing a lease deal.

Does car leasing show up on your credit report?

credit score 2

When you lease a car, the monthly payments you make for the car will show up on your credit report. This is because leasing is a finance agreement between you and the finance provider of your chosen deal.

It’s just like when you pay monthly for a phone contract, for example. The direct debit each month is reported to CRAs as a loan.

Can car leasing improve my credit score?

Yes, if you make your monthly payments on time for the car then you can improve your credit score.

The payment structure of a car lease agreement is similar to that of paying a monthly phone contract. Each time you pay on the dot, new information will be added to your credit file that can boost your rating.

Remember: If you have bad credit, you’ll find it difficult to obtain a lease deal as finance providers will see this evidence that you might not be able to afford the monthly payments. Experian and Equifax are the two primary credit companies used by leasing funders, both of which have good to excellent score margins of 881-999 and 420-700 respectively.

To find out more about bad credit and leasing, see our other guide about what your options are for car lease deals when you have bad credit.

Can car leasing harm my credit score?


If you don’t make the monthly payments for a car lease on time, your credit score will be negatively affected. Similarly, if you’re rejected finance when applying for a lease deal then this will show up on your report and could make it difficult to get approved for finance in the future.

Remember to budget for a car which you can afford the monthly payments for so that you can maintain your credit score.

How to check your eligibility before leasing a car

If you decide to lease a car, there are certain things you can do to protect your credit rating during the process. Here are three tips to ensure you don’t negatively affect your credit score during a lease deal.

1. Check your credit score

credit score report

You should check your credit score before applying for a lease car to get an idea of whether or not a finance provider will consider your application. There are different online checks available, and each one may use either the Experian or Equifax margins.

ClearScore, for example, offers this service forever – all you need to enter are some personal details and create an email/password login.

If your report comes back and you’ve got a score which is less than 420 or 881 (i.e. a ‘fair’ score), this isn’t the end of the world. As long as you haven’t got bad credit (a score of 0-379 when using Equifax, or 0-720 using Experian) most leasing companies will still take into consideration whether you can afford the monthly payments. This includes a ‘soft’ check of the bank account which you intend to use for the direct debit payments for the car, which won’t affect your credit score.

2. Make sure you can make the monthly payments on time

The only time car leasing will negatively affect your credit score is if you miss or are late with any of the monthly lease payments for the car. Or, if you’re rejected finance in the first place. However, the leasing company will set up a direct debit for the payments which works around when you get paid.

It’s important that you work out how much you can afford each month for a car before you apply. You can do this by deducting your monthly expenses from your regular income to find out what vehicle you can afford. When you do this, make sure that you factor in the cost of insurance as this won’t be included within the cost for the car.

3. Consider using a guarantor for your lease

Depending on the finance provider funding a lease agreement, you may be able to add a guarantor to the contract to help pay the remainder of the car off if at any point you default on them. This can be the difference between being approved to prevent your credit score from being hit negatively if you ever find yourself in a position where you can no longer afford the monthly payments.

Remember: Whether a guarantor is accepted on a lease agreement is judged on a case-by-case basis, and won’t be available to everyone. Also, the person you choose to be the guarantor will usually have to be a family member that has a good to excellent credit rating and lives at the same address as you.

Will I need to have a credit check before I lease a car?

Yes, a necessary part of being approved for a car lease deal is to undergo a credit check. Don’t worry though, this is only to make sure that you can afford the monthly payments, but isn’t a ‘hard’ credit check so it won’t affect your current score.

Want to find out what’s involved in the process for a car lease credit check? Discover everything you need to know in our complete guide to leasing credit checks.

Are you looking for a brand-new car at an affordable price? Compare prices now to get the best offers on our latest car leasing deals.

Do you need more information on how to keep your car finances in good order? Check out our other guides to car finance for everything you need to know.

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