Leasing

Does Leasing a Car Build Credit?

Have you often wondered if leasing a car builds credit? Find the answers you're looking for here, including how to use your next lease to build credit.

Read time

8 minutes

Date

08.22.2023

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Leasing brings with it several pros and cons, many of them apparent. However, have you ever wondered if leasing a car builds credit? If so, you’re not alone. Many people want to know if you can build credit with a car lease and how. 


Below, you’ll find the answers you need to determine if car leasing builds credit and how you can boost your scores for your next lease. Depending on your goals, you can also use a lease to build credit for your next auto purchase. Read on to find out how leases can negatively impact your credit, so you can stay ahead of the curve and walk away from your next lease with more than just a plan. 

Can leasing a car build credit?

Leasing a car can build credit when lenders report your payments to the three credit bureaus. A car lease impacts several aspects of your credit report, but whether that impact is positive or negative depends on you. Car leases can also have slightly adverse effects on your credit due to the nature of closing an account that appears on your credit report. 

Can leasing a car hurt your credit?

A car lease can hurt your credit if you fail to make on-time payments. If your payment is over 30 days past due, the lender can pursue legal action and report your late payments to the credit bureaus. In addition, voluntarily repossessing or defaulting on your loan can cause you to lose 100 points or more from your credit score and stay on your credit report for up to seven years. 


When you first start a lease, you may see a dip in your credit score. You may lose a few points to a credit check. Adding a new account to your credit report can also have a minor impact, but that’s the nature of credit. Initially losing a few points can result in gaining points later on. 

How leasing a car affects your credit

Leases affect each aspect in the following ways: 


  • Payment history: On-time payments help maintain your score, while late payments will harm your payment history. 
  • Amounts owed: Initially, your car lease will significantly increase your debts. However, your amounts owed balance will diminish as you make payments on your lease. 
  • Credit length: Similar to amounts owed, your credit length will decrease slightly with a new credit line. Longer leases will positively impact this score as they age.
  • New credit: A lease appears on your report as a new credit account. 
  • Credit mix: Ideally, you should have a mix of installment loans, revolving credit, and lines of credit to demonstrate to lenders that you can handle multiple types of credit. If you don’t have an installment loan already, a lease can help your credit mix.


The credit bureaus base your credit score on the following: 


  • Payment history: 35%
  • Amounts owed: 30%
  • Credit length: 15%
  • New credit: 10% 
  • Credit mix: 10%


The best time to lease a car is when your credit score is highest. A lease can also help sustain and improve your credit score as you go, provided you make your payments on time. Lenders will see your lease as an open account on your credit report, and positive open accounts carry more weight than closed accounts. 

What credit score do you need to lease a car?

To take advantage of the best car leasing deals, you must have a credit score above 700. Most leasing companies will pre-approve lessees with credit scores over 680. If your credit score falls between 620 and 679, you’ll likely experience speed bumps in leasing. 


For instance, a lower credit score may limit which cars you can lease. You may also have to come up with a larger down payment. If your credit score isn’t too far from 680, the lender may also up your money factor so you’ll pay more interest as a higher-risk lessee. 


FINN knows that life can sometimes throw you a credit curveball. A FINN car subscription requires a minimum credit score of 640, with no down payment required. If you’re looking for a lease alternative that still fits within your budget and helps you build credit, a FINN car subscription offers a convenient solution. 

Can you lease a car with bad credit?

You can lease a car with bad credit. However, you will pay more in interest, which translates to a higher money factor in the lease agreement. You may be able to lower your money factor slightly by negotiating with a higher down payment or a cosigner with a higher score than yours. You can also improve your chances of being approved for a lease by improving your debt-to-income ratio. 

How to prepare your credit for leasing a car 

Plan on leasing in the next six months to a year? Take this time to put your credit in order by focusing on the following areas: 


  • Avoid opening too many accounts: The temptation to use your stellar credit for other credit opportunities can be hard to resist. However, preparing for a car lease isn’t a great time to rack up your credit card debt or add another loan to your plate.
  • Make on-time payments: Good behavior will go a long way in keeping your credit score high. Be sure you’re paying your credit cards and any other loans on time. 
  • Check your credit report: You can request a free annual credit report without impacting your score. Check your report to make sure there are no errors or misreported information. If there are, dispute the errors as soon as you can.  
  • Keep credit utilization low: Ideally, you should only use about a third of your credit limit to stay within healthy credit utilization limits. Pay down balances on your credit cards to achieve this credit utilization rate. 
  • Stay at your current address: Believe it or not, many lenders will look at how long you’ve been in your home or apartment when considering your application. If you can manage it, stay at the same address for a few years to demonstrate stability. 
  • Ask for a credit limit increase: Increasing your credit limit will help improve your credit utilization score. Call your credit card company to see if you can obtain an increase. Even a $1,000 increase can make a difference. 


Improving your credit score before a lease can be challenging, but it’s often worthwhile when you pay less for your lease. You can also extend these habits to other instances involving credit, from a car loan to your mortgage.

What to consider before leasing a car to build credit

Before you lease a car, you might wonder, what documents do you need to lease a car? However, you should also ask yourself, “What can I do to improve my financial situation before leasing?” A proactive approach can help you afford and enjoy your lease. 


In addition to improving your credit and working within your budget, here are a few other aspects you should consider before leasing a car to build credit:


  • How long do I want to keep my next car? 
  • What’s my budget for paying for maintenance? 
  • How important is it to me that I drive a newer vehicle? 
  • Am I looking for a short-term or a long-term transportation solution? 
  • Will my credit score improve in the next six months to a year?


Leasing a car for years can be quite a commitment, especially for improving your credit score. Consider a FINN car subscription to avoid the hassle of lease-end fees and the pressure of finding another lease deal or transportation solution. FINN makes it easy to subscribe to the car you want for a short period so you can better manage your payments. At the end of a FINN subscription, you can choose another car and repeat the process until you’re ready to make your next move. 

Is leasing a car worth it?

Leasing a car can be worth it for many reasons, from driving the newest cars to paying less for a vehicle upfront than if you were to finance. However, leasing may not be worth it if you can’t use your leased car equity and purchase the car after your lease is up or if you want to drive your next car for more than three or four years. Most often, the decision between leasing and the alternatives lies in your personal preferences. 


One leasing alternative is a FINN car subscription, which lets you pick between six and 12-month terms with a single monthly payment. Included in your payment are depreciation, insurance, registration, and maintenance. FINN offers a wide selection of trucks, electric vehicles, SUVs, and premium sedans, all of which can be delivered straight to your door. 

Final thoughts

Leasing a car can help you build credit if you work within your monthly budget and make on-time payments. However, leasing can damage your credit if you voluntarily repossess your car or default. Before you sign any lease agreement, be sure you can afford your monthly payments for the next few years and that you improve your credit score for a better lease deal. 


On the other hand, you can also subscribe to a car with FINN. When you subscribe to FINN, you can choose the vehicle you want to drive, from the make and model to the color and trim level. FINN also covers insurance and maintenance costs, so all you have to do is fuel up and drive. In an uncertain leasing world, a FINN car subscription provides a convenient and affordable solution. 

Does Leasing a Car Build Credit
Does Leasing a Car Build Credit

Final thoughts

Leasing a car can help you build credit if you work within your monthly budget and make on-time payments. However, leasing can damage your credit if you voluntarily repossess your car or default. Before you sign any lease agreement, be sure you can afford your monthly payments for the next few years and that you improve your credit score for a better lease deal. 


On the other hand, you can also subscribe to a car with FINN. When you subscribe to FINN, you can choose the vehicle you want to drive, from the make and model to the color and trim level. FINN also covers insurance and maintenance costs, so all you have to do is fuel up and drive. In an uncertain leasing world, a FINN car subscription provides a convenient and affordable solution. 

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