Should you buy or lease a car from a credit perspective?

Should you buy or lease a car from a credit perspective?

What is the impact on a person’s credit history, if they buy or lease a car?  With both situations a borrower will have a new installment loan and a new inquiry. So expect your credit score to dip down just a little bit when you first apply for auto financing. As time passes, it will help you establish a good payment history on that new account and the inquiry will fall off.

An individual’s credit score will actually improve quite a bit more than it would have without the auto account, provided you make the payments on time. I would say about eight to nine months, from that point forward your score is going to be higher than it would have been without the loan. Long term, an auto loan is probably the best choice, from a credit perspective because you will add an installment type of account.  Provided that you make all the payments on time.  When you enter into a lease agreement those are usually a shorter term agreement.

Borrowers are going to have an inquiry ether way and are going to have the new installment type of agreement. The same reasons a car buyer’s credit score will drop, a auto lease will also create a temporary drop. After five to seven months borrowers can expect their score to start to improve.

The problem with a car lease is that it is a shorter term obligation. Consumers will have a shorter period of time when their credit score will benefit from the lease account. Normally, you will need a new lease sooner than a car loan. Consumers could have two or three leases in the time that they would have had one car alone. That situation is not as good for a credit score as just buying a car and then keeping that car until the loan is paid off. Leasing is not hugely negative from a credit score perspective, but not as good as just financing the purchase of a car.

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If you want to see more videos about credit and credit scoring check these out at www.thecreditguy.tv. If  you are a mortgage lender please share this on your Facebook or LinkedIn page.   If you have any questions, leave them down below I’d be happy to answer them.

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Go to www.getloanready.com to find other ways to improve your credit score. I’m Dave Sullivan here for the credit guy TV so you with a little bit me we’re going to change the credit industry thank you

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