October 19, 2024

How Your Credit Matters When Buying or Leasing a Vehicle

What do lenders or insurers review in my credit report?

Your credit report tells a detailed story about you, including your financial accounts and payment history. This information is crucial to lenders, as it helps them decide whether to approve or deny your application, as well as the interest rates they'll offer you if you're approved. Here are the key points they typically review:

Payment history: Lenders want to know if you're keeping up with your credit account payments. Do you have late payments or accounts in collections? While a few missed payments don't always result in a credit denial, they could mean less favorable loan terms.

Debt-to-credit ratio: If you're using a high percentage of your available credit, lenders may see that as a red flag.

Length of credit history: Having a long history of responsible credit use can work in your favor. Lenders prefer to see that you've been consistent over time.

Types of credit: A good mix of different types of credit (credit cards, personal loans, mortgages) can show that you handle multiple sources of credit reliably.

New accounts: Opening many new credit accounts in a short period of time can make lenders doubt your ability to pay.

What if I'm not buying a car, but leasing or renting one?

When you apply for a loan to buy or lease a vehicle, lenders look at the same criteria on your credit report. However, even renting a car can affect your credit or be conditioned by your history.

When renting a car, you generally need to use a credit or debit card. If you use a debit card, the rental company may review your credit report to assess the risk of renting you the car. This type of review could affect your credit score, so to avoid that impact, consider using a credit card.

How can I see what's on my credit report?

To check your credit report with Equifax, you can create a free account at Equifax Core Credit™ and click "View your credit report" on your account summary. Additionally, you are entitled to one free annual credit report from each of the three major credit bureaus (Equifax, Experian and TransUnion) by visiting annualcreditreport.com.