If you’re looking to lease a car – or take on any other kind of car finance deal like personal contract purchase (PCP) or hire purchase (HP) – you’ll need to complete a credit check as part of your application.
A credit check is essential in any process where you’re looking to borrow money. It’s a requirement of the Financial Conduct Authority (FCA), and it’s the primary assessment of your suitability for funding for lenders. Indeed, a credit check for a car lease doesn’t just define whether or not you can get the deal in the first place, but also what the key terms of your contract will look like going forward.
Pretty important stuff, then, and perhaps a bit daunting if you’re new to it all. The good news is Hippo is considered something of a ‘bad credit specialist’, and we’re big believers in the idea that everyone should be able to find a deal that works on a car they love, no matter their financial history. That means we work with anyone we can, and know plenty about both good and bad credit leasing.
That leaves us rather well-positioned to answer the big questions relating to credit checks and credit scores for a car lease. So, if you’re wondering about things like what credit rating is needed to lease a car, or what the difference is between a soft and hard credit check, this guide will help.
READ: Which credit reference agency should I use to check my credit report?
Why do I need a credit check to lease a car?
A credit check is when a company reviews your financial history in order to see whether you’re suitable to lend to. In the case of a car lease, it’s typically carried out by the finance company that’s potentially going to provide you with the lease. They’ll evaluate your credit report to review your outstanding debts and repayment history, and also look at whether you have, or have had, any bankruptcies or defaults to your name.
All of that’s done to assess the risk of lending to you. If you’ve got a good credit history – for example, you’ve got minimal debt, have a history of making repayments on time and haven’t defaulted on any payments in the past – you’ll be considered lower risk and be more likely to be accepted. If you’ve got the opposite, you’ll be considered higher risk and be less likely to be accepted.
Once you’ve made up your mind about leasing a car, one of the first steps will be a credit check. Your provider will likely let you know they’re going to perform a check before they do it, however they’re not legally required to.If you’ve submitted a leasing application, they have the right to carry out a credit check without your consent.
The chances are that you’ve already done the math on a potential lease. Youprobably know exactly how much you can afford to pay monthly for a car. You may even have some emergency funds at your disposal. However, neither of these realities exempts you from a credit check. Leasing brokers (like us) will use your credit score to estimate the cost of leasing a car to you. With your credit information, they can accurately price up payment terms, deposit commitment, and your overall and monthly price to lease a car.
When your lease application is processed, your provider will perform either a soft or hard credit check. Both are used differently and have varied impacts on your credit score and the progress of your application.
What is a soft credit check?
If you’re curious to learn more about where you rank on the credit rating scale, a soft search is the best place to start. A soft credit check is a top-level review of your financial history. Only selected information is shown and analysed, and crucially, performing one doesn’t impact your credit score, nor is the review visible to other companies.
That means you can use a soft search to gauge your eligibility for credit without any implications – and before you submit a formal application which comes with a hard search that does have an impact on your credit record. And because these checks aren’t recorded, you can perform them as frequently as you like.
The green ‘check eligibility’ button you see at the top of this page is our soft credit check for customers who want to know where they stand before they formally apply for a lease. So, if you want an idea of how likely you are to be accepted for credit with us, you can get started there, or with this banner below:
What is a hard credit check?
A hard credit check is carried out when you make a full application for credit – for example, a mortgage, loan, credit card, phone contract or, of course, a car lease. It’s a full review of your financial history that’s used to determine how much risk you pose as a borrower.
Hard credit checks are always logged on your credit history, are visible to other companies and can impact your credit score. A hard search will stay on your report for up to a year – or longer in certain instances (a debt collection check, for example, will remain visible on your report for up to six years).
You need to be careful with how often you subject yourself to a hard search. Too many hard credit checks in a short space of time can suggest to lenders that you’re financially unstable or overly reliant on credit and, therefore, pose a high risk to lend to. As such, it’s recommended you try to leave at least three months between applications.
What will a credit report reveal to funders?
Your credit report shows lenders the following:
- Your name and date of birth.
- Electoral roll information – whether you’re registered to vote.
- Your previous addresses.
- Public records showing if you have any court judgements, IVAs or previous bankruptcies.
- Your credit accounts for the past six years.
- Your repayment history.
- Information on your credit limits and loan amounts on any mortgages.
- Any other credit cards and loans you have.
- Details of your current account overdraft.
- Details of other applications you’ve made.
- Whether your home has ever been repossessed.
- Your financial connections to other people and any joint credit you may have.
- Information about whether you’ve missed or made late payments, as well as the number of times this has happened.
- Whether your identity has been used for fraud.
- Any previous searches made for similar applications filed in the last 12 months.
A creditor will use this information to build an understanding of your borrowing history. From this, they form a decision on whether you’re likely to meet the payments agreed for your lease.
There are many reasons why an application can be rejected. Take a look at our article ‘6 reasons why your car finance was refused and what to do next’ to get an idea of some of the most common.
What are lenders looking for on my credit report?
Put simply, lenders are looking for reasons why they should or shouldn’t give you credit. The big things they’re looking for are missed or late payments on other credit, any substantial history of debt and how many different credit accounts you hold.
Most companies have their own credit scoring system. Your credit rating will be used against this to gauge your eligibility for finance. This is why you might end up getting different answers from different lenders.
Do you need good credit to lease a car?
No, but it certainly helps.
A strong credit history shows lenders you’re likely to meet the financial commitments of a car lease. Good credit means you’ll be considered lower risk, and you’ll meet the scoring requirements of more lenders. This, in turn, will give you a broader choice of options, which is often accompanied by the opportunity to take a lease with a better interest rate and lower monthly payments.
If you’ve got bad credit, you might still be able to get a lease (of course, there are limits to what any lender deems acceptable when it comes to bad credit), but it’ll likely come with less favourable terms like a higher interest rate and bigger upfront or monthly payments. This is because lenders willing to work with bad credit applicants take measures to protect themselves financially i.e. charge higher upfront payments to cover the perceived higher risk of non-payment at some point during the agreement.
If you’re struggling with bad credit, it’s important you find a provider that’s known for helping those with poor credit find manageable deals. That’s something we specialise in – take a look at our bad credit offers for more information.
What’s the minimum credit score to lease a car in the UK?
As we’ve already established, there’s no set ‘minimum’ score to lease a vehicle in the UK. Most lenders have their own scoring system and parameters of what’s considered acceptable risk.
As a general rule, you’ll need a ‘good’ score to get a car lease without any issues. As for what ‘good’ is, that can differ in number across the three major credit agencies used in the UK: Experian, Equifax and TransUnion. If we take Experian, a ‘good’ score is north of 800 (out of 999), so by Experian standards, you’ll need a score of 800+ to pass your credit check without a hitch.
It’s also not game over if you sit under that ‘good’ score. You may struggle more to get finance, but with the help of a bad credit specialist, you may be able to find a deal that works for you. Our article on how to lease a car with poor or bad credit can shed more light on what to do if you’re in that position. You can also take a look at our affordable bad credit leasing deals using this button:
Where can I check my credit score?
Here are the links to the three major credit agencies in the UK: Experian, Equifax and TransUnion.
All three offer a free version or trial of their service, with paid versions available for those looking for more detailed support with their credit.
Can I lease a car without a credit check?
The general answer is no. The BVRLA (British Vehicle Rental and Leasing Association) states on their website that all legitimate leasing brokers should adhere to FCA rules, which include credit and affordability checking.
You may see some companies offering ‘no credit check car leases’ or similar. These businesses usually lease and finance the vehicles directly, and the rates they charge tend to be extortionate.
How long does a credit check take?
Most lenders will perform an instant credit check once you’ve submitted your application and get an automatic decision based on the result of this check. In most cases, however, it’s the job of an underwriter to manually review your credit check, and their judgement will determine the final decision.
Expect a 24- to 48-hour wait for a decision. Turnaround times can often depend on what time of day you submit the application and the underwriters’ workload. During busy periods, or when there’s a weekend or bank holiday, you could end up waiting for up to five working days. This varies from lender to lender, and you should always get in touch with your provider if you’ve not had a response within the time scale promised.
You can use our free soft credit check to check your eligibility for finance quickly. Applying takes a couple of minutes, and you can find out in as little as half an hour if you’re likely to be accepted should you wish to proceed with a formal application.
READ: 14 Credit Score Myths Debunked
What else do you need to lease a car?
You’ll need to give the following information to lease a car:
- Full name.
- Date of birth.
- Fives years of address history, plus your status as a homeowner/renter.
- Marital status.
- Number of dependents.
- Employment status and details, including salary info.
- Contact details, including phone number and email address.
- Bank details.
You’ll also need to provide the following identification and documentation:
- A copy of your photocard driving licence.
- Proof of address.
- Proof of employment/income.
- Proof of insurance (which is almost always fully comprehensive for a lease vehicle).
Improving your chances of leasing a car
If you think you might be in a less-than-ideal financial state to make an application, it’s always best to wait and see if you can get yourself into a stronger position before applying. Some things you can do to improve your chances of leasing a car include:
- Checking and improving your credit score: a good credit score is critical to your chances of finding a good deal. Take a look at this Hippo Finance article on the top 5 tips to boost your credit score for what to do.
- Offer more upfront: putting down a higher initial payment on your lease reduces the risk for the lender.
- Consider a guarantor: a guarantor is someone with a stronger financial history than you who agrees to cover your payments in your place if required. Having the loan amount guaranteed by an additional, more secure party vastly reduces your risk profile.
- Choose a more affordable vehicle: if your proposed repayment terms are looking a little steep, reassess what vehicles you’re able to afford on the terms you’ve been offered.
What if I am refused car finance?
It can be really frustrating if you’re declined car finance, particularly if you know you have the funds and are able to make the monthly payments.
Rather than immediately reapplying, it’s worth taking some time to try and understand what went wrong. You have the right to ask a lender why they declined your application, and while they might not be able to go into detail, they can give you the name of the service they used for your credit check. You can then look to obtain your report from the agency to assess any issues:
Common reasons for being declined finance include:
- Poor credit rating.
- Limited or non-existent credit history.
- Employment history.
- Not appearing on the electoral register as a voter.
- Mistakes on your application.
- Lender-specific requirements.
- Too much existing debt.
- Too many recent credit applications.
- Evidence of payday loans.
- Prior bankruptcy.
- County Court Judgements (CCJs).
- Identity theft or fraud.
Once you have the report, check it for any discrepancies and errors. If you find any, you can address these with supporting evidence. If you believe you’ve been the subject of suspicious activity and/or identity theft/fraud, inform your bank immediately. You can also contact Cifas, the UK’s leading fraud prevention service.
Only consider making another application once the original issue has been addressed and resolved. Invest some time in improving your credit score, and try to be certain that another application won’t affect your credit rating. If you think you might be refused finance again due to a poor credit score, our article on how to prepare your finances for a car finance loan might help.
Find a lease that works with Hippo
We’re here to help you find a lease deal that works on a car you love, no matter your financial circumstances. Our bad credit offers are built for affordable leasing even if you haven’t got the best credit. Plus, you can get an idea of where you stand today by using our free soft credit check that won’t affect your credit score.
We can also answer any questions you have over the phone. Get in touch with us today, and we’ll offer you all the support we can.