Your Credit Score Vs. Buying or Leasing a Car

Your credit score is very important when applying for a loan or getting a lease. Your credit score, when defined is the number that allows lenders and creditors to identify if you have the capability to pay back a debt that you owe, based on your history as a borrower. The higher your credit score is, the more likely creditors will see you as a person who has the capability to pay back the money that you borrow.

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Photo Credit: Good Financial Cents via Pinterest

Your credit score is also used to determine whether you are qualified to get credit for things like a credit card loan, a loan to finance your college tuition, a housing loan, a loan to buy a car or if you are financially qualified to lease a car. It is also used to determine what type of loan you are qualified for, how much credit you are qualified for and what the interest rate would be.

In this case, does buying or leasing a car have an equal effect on your credit report? When purchasing for a home, every credit score point counts to help you save money on your purchase. This will help you secure the best and most available mortgage rate according to your financial capacity as a loaner. However, taking a loan to buy a car or leasing one has the same effect on your credit score. This is because both are considered as installment loans and does not require a keen inquiry into your credit report. Tougher credit report inquiries are usually performed when applying a loan for a credit card, mortgage or when renting an apartment.

When leasing a vehicle, you will be just inquired once, by the leasing company. A financed purchase on the other hand will involve several queries from different lenders that will cater your loan. You may see a few drop in your credit score after a lender checks your report. This query may remain on your credit report for a year or two years, but not any longer than that. A soft inquiry on your credit report on the other hand does not have any impact on our credit score. A perfect example of a soft check is when you are pre-approved for a credit card.

Your credit score will change as soon as your new debt is added to your existing credit report. Nonetheless, buying a car through a loaned amount of money or leasing it does not have a significant impact on your credit score.

 

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