Your credit history is the first thing that a leasing company will check when considering whether to do business with you. Banks use your credit history as a basis for determining the level of risk involved with writing you a loan or lease. With a good credit score, you are a great candidate for a lease. However, with a blemished credit history, you will be less likely to be approved by the leasing company. There are some financing institutions that are willing to write leases for people with poor credit, but these leases typically carry very high interest rates, which can be extremely expensive.
Credit history is typically the most important factor that effects an individual's vehicle purchase decision.
Back to the top
Often, a credit bureau has a score associated with it, which is used by a lender to quickly categorize various credit candidates into different classifications based on perceived risk. This score, often referred to as your Beacon Score, is derived from a formula that utilizes the information provided by a credit bureau. The score is inversely related to the risk a credit candidate poses to a lender in terms of repayment. Simply put, the higher the score, the better chance you have of being approved for credit. Credit scores have a top end of approximately 800, with most individuals falling in the 500 to 700 range.
Back to the top
You may have heard your credit, or someone else's, referred to by using an alphabetical letter, or more specifically A, B, C, or D credit. These classifications are related to credit score and are another way that lenders group and categorize potential credit candidates.
The following credit score ranges are commonly used and accepted by most lenders when rating one's credit worthiness:
| Number Rating |
700+ A
670-699 B
640-669 C
under 639 D
|
Back to the top
Securing a low interest rate can help you to save thousands of dollars on a lease. Although you do have the ability to shop different banks for the best interest rate, your credit history will ultimately determine which interest rate you are eligible for.
The higher your credit score, the lower your interest rates (money factor) will be.
A lot of the 'amazing' deals that are advertised for 'nothing down' and 'no interest' are for people whose credit score is 700+. However, most people do not have perfect credit, which means that the interest rate will be an issue of concern. If your credit is not great, you should consider credit improvement before trying to secure an attractive interest rate.
Back to the top
You are considered to have excellent credit when your score is 740 or above. With a score in this range, you set yourself up for the best lease rates.
With a score from 680-739, you are considered in the prime category and will be approved. 620-679 scores are in the “near prime” range and most people will be approved. However, you may receive a higher interest rate.
When you have a credit score below 619, you are considered a “subprime borrower” and will have to pay much higher interest rates.
At Swapalease, we suggest you have a credit score above 620 to avoid high interest rates and that you have a 660 to acquire the best best rates. Regardless, every lender will set their own qualifications for lease originations and taking over a lease will often require even better credit than what is needed for starting a new lease.
Back to the top
