How to rent a car if you have bad credit
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Leasing a new car is difficult enough without the additional problems of a bad credit history. A bad credit score can make leasing a new car a challenge.
While the dealer may have an edge due to your less-than-star rating, it's important to remember that you have options. The car leasing experience will definitely be more challenging thanks to your credit score, but it doesn't have to be impossible or even unpleasant.
Doing a little homework ahead of time can make the process much easier and greatly increase your chances of landing a deal that pleases both you and the dealer.
Let's take a look at a few ways to make your dream car ride a reality, no matter your credit score.
Part 1 of 4: Know what you're dealing with
You want to go to the dealership informed. Knowing your credit score accurately will save you the surprises when you hit the dealer floor. Here's what you need to know about FICO scores:
Free credit reportA: Everyone is eligible for a free credit report from one of three credit bureaus each year. Contact Experian, Equifax or TransUnion for a copy of your report. You can also get a copy from the AnnualCreditReport website.
What does it containA: A credit score or FICO score is simply a measure of your creditworthiness. All current and past credit scores will be detailed in the report. These include credit card accounts, mortgages, and any loans or leases. It will also note any late or missed payments, bankruptcies, and property seizures.
- Your score is calculated using a proprietary algorithm, so it may vary slightly depending on the credit bureau. Consider getting reports from all three agencies to make sure they all have the same data. Review your credit report carefully, and if you find any errors, contact the reporting agency immediately to have them corrected.
| FICO credit score | |
|---|---|
| Account | Rating |
| 760 – 850 | Perfectly |
| 700 – 759 | Very good |
| 723 | Average FICO score |
| 660 – 699 | Well |
| 687 | Average FICO score |
| 620 – 659 | Not good |
| 580 – 619 | Not really |
| 500 – 579 | Very bad |
What does it meanA: Credit scores range from 500 to 850. The average score for US consumers is 720. Scores above 680-700 are considered "prime" and lead to better interest rates. If your score falls below 660, it will be considered "sub-prime", which means you will pay a higher car rental interest rate. Once your account drops below 500, it will be very difficult to get any type of rental.
Only your credit score matters: Car dealers are not going to check your credit report; they will only pull your account.
Part 2 of 4: How credit affects car leasing
A low credit score will affect the car leasing experience in different ways. Here are a few ways your substandard score can make things a little more difficult:
Consequence 1: Higher down payment/deposit. Since you are considered more risky, the financial company will want you to have more skins in the game. Be prepared to pay a significantly higher down payment than buyers with a "prime" credit score. Most lenders ask for at least 10% or $1,000, whichever is higher.
Consequence 2: higher interest rate. The best interest rates are reserved for buyers with better credit scores, so "subprime" buyers will pay a higher rate. The interest rate penalty will vary depending on the lender, and this is where buying your financing can make a big difference.
Be realistic. A low credit score can definitely affect the number of cars you can rent. Be realistic when buying a car and make sure it's an affordable vehicle. Missed payments will only worsen your credit situation.
The car you've been approved for leasing may not be the trip of your dreams, but once your loan is repaired, you can buy a new car or refinance it at a lower interest rate.
Part 3 of 4: Find Funding, Then Find a Car
The truth is that finding affordable funding is likely to be more difficult than tracking down an eligible ride. Consider all options when seeking funding.
Step 1: CallA: While many dealerships will try to win you over, many will be honest with you about your chances of getting approved.
To get an idea of how bad your situation is, call several dealerships, explain your situation, tell them the price range that will suit you, and simply ask them what your chances of getting approved are.
Step 2: Get your paperwork in order: Your credit score will raise some concerns, so take a lot of documents with you as a backup:
Some of the documents you need to bring to prove income include pay stubs, Form W-2, or Form 1099.
Bring bank statements, utility bills, lease agreements, or a mortgage statement as proof of residence. The longer you stay at your current address, the better.
Step 3: Shop at DealershipsA: Financial companies assess risk differently, so your goal is to find a financial company that suits your specific risk factors.
Dealerships will often work with "sub-prime" lenders who are willing to finance rental deals for customers with bad credit.
- Functions: When shopping at dealerships, bring your own credit report. Every time the dealer takes you out of credit, he makes your score worse a little. Unfortunately, these calls can cause serious damage if you hit a large number of dealers. Only let the dealer take you out of credit if you're serious about the deal.
Step 4. Use the Internet department of the dealership.A: You can also shop online at the dealership.
Using a site like Edmunds.com, you can submit requests for quotes from online managers at different local dealerships at the same time.
After receiving the price offer, send an email with a request for a leasing offer.
This makes it easy to compare rental prices at different dealerships.
Step 5: Get ReadyA: Regardless of your credit score, it's always a good idea to be prepared to rent a car.
Research the car you are interested in and review the meanings of Kelley Blue Book so you know what price to pay.
- Functions: Before closing a deal on a used car, it's worth getting a trusted mechanic to inspect it so there are no surprises after you leave the lot. If you have any doubts about the condition of the car or the deal, keep looking.
Step 6: Get Funding: Car dealerships and their financing partners are not the only sources of auto loans.
This is especially true for car renters with poor credit scores. Lenders who specialize in "subprime" loans may be a more affordable solution. Shop your loan with these lenders to see what's available to you.
- FunctionsA: Remember that there are other options. The car dealer who uses your credit history to get you a bad deal is not the person you want to do business with. Never accept an offer that you are unhappy with or cannot afford.
Part 4 of 4. Consider other alternatives
If you just can't find a deal that makes financial sense, you may want to consider other options. Whether it's renting a car, buying a car from a friend or family member, or taking public transportation for a while longer, thinking outside the box can be required.
Option 1: find a guarantorA: This can be a difficult option.
A guarantor is someone who has a decent credit score and is willing to sign your loan. The sponsor can be a friend or family member.
Keep in mind that this will put them on the hook for payments if you don't make them. Thus, this is not an agreement that should be lightly entered into by either party.
To become a co-borrower of a rented car, you must:
Credit score of at least 700 or higher.
Proof of their ability to play, including pay stubs or payroll vouchers, or tax returns for self-employed co-borrowers.
Stable residence and work experience. Just like a person signing for a lease, lenders prefer guarantors who have lived and worked in the same location for an extended period of time.
Alternative 2: Assume rent: You can take over an existing lease.
This is called the transfer of a lease or the assumption of a lease.
Essentially, you are taking on lease payments for someone who needs to get out of a car lease.
Although your credit will be checked, the requirements are not as strict as a car loan or a new lease. Visit Swapalease.com to find out about rentals available in your area.
Alternative 3: Improve Your Credit Score: The truth is that improving your credit score is not a quick and easy process, but it can be done.
Paying your bills on time should be your number one priority.
Here are some more ways to improve your ranking:
Pay off the largest credit card balances. The difference between your balance and the card limit is an important factor in your score.
Opening a new credit card account and paying off the balance every month. This shows that you can be responsible with credit and improve your score.
FunctionsA: If you have a very low credit score, consider a secured credit card. These cards require collateral, but they can be very helpful in repairing a badly damaged credit.
Renting a car with bad credit is difficult, but possible. It will take research, shopping, and patience to find a deal that works for you and your budget. Once you've closed the deal and hit the road, all the work will be worth it.
