Does Leasing a Car Build Credit?
If someone asks you does leasing a car build credit? that is only a very small part of it, as any bill paid on time can contribute to a good credit rating. While any bill paid late or overlooked can cause a downgrade in your credit rating. Once your credit score is lowered it can take months to get it up again. So while you are building your credit, consider using a credit monitoring system, especially if you are planning to buy a house.
The best thing to do is to sign up with a credit monitoring system like Credit Karma, a secured site, but you will have to give personal information like a social security number before you can sign up. Without giving this number, it would be totally impossible for you to get a credit score. When you give this information to Credit Karma your social security number will not count as a hard inquiry as you will be using the Credit Karma site to gather information. Without a credit score, it would not be possible to buy a home, and if you are a first home buyer it is really essential that you sign up with Credit Karma to start a credit history.
HOW CAN YOU RAISE YOUR CREDIT SCORE?
- Check your credit report regularly.
- Pay bills on time.
- If you are ‘in collections’ pay it out.
- Catch up on all bill payments.
- Lower credit card balance to around 40% to 50% maximum.
- Pay off as much debt as you can.
- Make sure your credit score is correct.
- Don’t apply for more than two credit cards.
- Use different credit types to build your score.
- Don’t move house and change jobs too often, this is perceived as unreliable.
- Create a good relationship with your bank.
HOW LONG DOES IT TAKE TO BUILD GOOD CREDIT USING A CREDIT MONITORING SYSTEM?
Credit Karma is a personal finance monitoring system allowing consumers to monitor their own credit scores. The company makes money from advertising sales, so this is a ‘win-win’ as consumers get this service free of charge. Credit Karma also educates consumers about the impact of their credit scores, and this is something many people don’t understand until they want to buy a house!
Two or three credit agencies directly report the Credit Karma scores, and are fairly accurate, although nothing can be 100% and if you notice discrepancies in your rating that you feel are unjust, you will need to address them. So when you use the Credit Karma website it will enable you to track progress and any changes to your credit. Credit Karma also notices identity theft trends and will flag them if you are at risk.
Credit Karma is a rapidly growing company, and the good thing is that the credit scores are becoming more accurate. Credit Karma uses two of the major reporting bureaus they are TransUnion and Equifax and uses Vantage score, another model separately.
WHAT SHOULD MY CREDIT SCORE BE?
FICO AND VANTAGE scores will be between 300-850, and others scale between 250-900. So there is no such thing as a zero credit score. Your score is basically built by doing the right thing based on the information on your credit report. The initial reason for a low credit score is often lack of credit applications, so does leasing a car build credit? is a valid question, and when you do lease one this will be noted on your credit report.
TransUnion will update weekly, enabling you to see where your credit score is, seeing your current score and past scores. This will ensure that when you log into the Credit Karma Dashboard you will spot any changes and problems immediately. If you receive an alert from Credit Karma, it means that something has changed with your score and you had better look at it to see if it is an activity that you recognize.
WAYS TO BUILD CREDIT
1. OPEN A CREDIT CARD FOR CONSUMERS
Open a credit card for no credit.
2.TAKE A CREDIT BUILDER LOAN
The lender holds the money, while you pay it back monthly, in an account that accrues interest. When it is paid it is released back to you with interest. This helps you to establish a credit rating.
3.AUTHORIZED USER STATUS
Ask Mum or Dad to add you to their credit card as an authorized user. As long as they have a good credit score this is fine and will help to boost your credit score.
DOES LEASING A CAR BUILD CREDIT?
Many companies now insist that their workers use their own car for work, and if you can’t buy a car it will be necessary to lease one for work purposes. You then go to your boss and ask them to guarantee the lease payment to the company. While you are working there most companies will agree to do this, often making a direct debit payment to the company on your behalf on payday, and it helps to build your credit score.
Leasing a car ensures lower monthly payments while building your credit score, and this may be the best alternative for you. Just read the agreement carefully, as you may be prohibited from making changes to the vehicle. There will also be mileage limits that can be a bit restrictive, but when you are building your credit score it is worth putting up with restrictions for a few years.
MONITOR YOUR CREDIT SCORE
Keep monitoring your credit score, and avoid unnecessary credit applications. Pay down any outstanding debts, and watch your debt to income ratio closely. When the car lease comes to an end, consider buying your own car next time and paying it off. This way your car will end up being an asset, when we lease we end up with nothing at the end.
Once you have built a good credit rating, you will be able to consider buying a property, but first, you will have to save a deposit of 20%, and these days that takes a few years to do, so start saving now for your future.