If you're someone who's dealing with a less-than-perfect credit score, you know how tough it can be to rebuild credit. Though it will take some time to rebuild your credit score, it's entirely possible to do so. For many people who are trying to shop for a car with poor credit, the idea of securing an auto loan to help pay for it may be daunting. However, one option for you to simultaneously get a new car and rebuild your credit is to choose to lease a vehicle. How does this work? Let's start by looking at the factors that make up a credit score:
? 35% Payment History: Do you make your payments on time?
? 30% Debt Burden: Do you have outstanding debt or unmade payments?
? 15% Length of Credit History: How long have you had your credit and bank accounts?
? 10% Recent Credit Searches: Do you inquire about your credit too often?
? 10% Types of Credit: Do you use a good variety of credit? (Revolving, mortgage, installment, consumer finance, etc.)
Of these factors, leasing a car can positively impact at least three of them for sure.
1. Payment History: When you enter into a lease, you're agreeing to make a monthly payment on the car until the end of the lease term. As far as credit goes, a lease functions just like an auto loan; however, since monthly payments on a lease are typically lower than on a loan, leasing tends to be easier on a budget. If your wish is to rebuild your credit, then the most important step that you can take is to make sure you never pay late; if you complete lease payments on time, your credit score will be repaired over the course of your lease.
2. Debt burden: Like a loan, an auto lease has a set value that will be paid out over the course of your lease term. Debt burden, which accounts for 30% of your credit score, is impacted by how often payments on it are made. In starting a lease, you'll initially be adding a large sum of debt burden to your record; however, as regular payments on this debt are made, it will begin to positively impact your credit score, as it demonstrates a regular, consistent reduction of your debt burden.
3. Types of credit: If your debt is concentrated primarily in one type of debt, say student loans or credit cards, it will benefit your credit score to have a large volume of a different type of credit added to the mix.
On top of these three factors, when you choose to lease a car as opposed to buying, in most scenarios you'll save money from the get-go: Leasing typically requires a lower down payment, as well as lower monthly payments, so right away you'll have saved money that can be put toward savings or paying off other debts. At Ghent, we will offer you a range of leasing options, with varying interest rates and payment plans, and you'll pick the one that works best for you. They key is to pick a lease plan that you feel comfortable paying on time each month. From there, rebuilding your credit is just a matter of time.