If you need a new car, you may consider leasing one rather than making an outright purchase. It can help spread out payments and lower the overall financial burden.

family in new car

With bad credit, however, you might face a few obstacles when you go to apply for a car lease. Luckily, there are ways to get around them so that you can successfully lease a car that fits your needs.

What kind of credit score do you need to lease a car?

When applying for a car lease, you’ll almost always have your credit checked as part of the process. The worse your credit score is, the less favorable the terms of your lease will be. On top of that, you may be required to pay a larger down payment with a lower credit score.

So what’s the minimum credit score needed for a car lease?

There’s no hard and fast rule, and the exact number may vary based on the lender. But in most cases, expect 620 to be near the bottom of what’s allowable. If your score is under that, it’s still worth applying for the lease, as long as you’re willing and able to pay extra for it. You should be alright with anything above 680.

Anything under 600 is classified as “subprime.” You may have to put down a security deposit for the car if you’re in this category. So again, in this case, it may not be prohibitive to qualify for a car lease, but it may be cost prohibitive depending on your financial situation.

Shop around to figure out what you can expect to pay both monthly and upfront with your current credit score. That can help inform what kind of car you should look for.

See also: What Credit Score Is Needed to Lease a Car?

How much do you have to put down on a car with bad credit?

Down payments for a leased car are usually paid in the form of a security deposit. For most people, it equals one month’s payment that’s rounded up to the closest $50.

With a $375 monthly payment, for example, your security deposit would then be $400. If your credit is bad and you want to get a lower interest rate — also called money factor for car leases — you can pay additional months of security deposit.

The plus side to paying extra for your security deposit?

You get that money refunded at the end of your lease term. The downside, of course, is that you need more cash on hand to take advantage of this strategy. After all, depending on your monthly lease payment, two or three months of a security deposit could easily surpass $1,000. You need to have the financial security in order for it to make sense to tie up that money for the length of your lease term.

Another down payment option if you have bad credit but extra savings is to do a one-pay lease. This is another way to save money on interest over time, but it requires paying your entire lease in a single lump sum.

This may or may not be a smart move depending on how much you could save versus how much you could earn putting the money in another investment. But if you’re facing high interest rates due to bad or limited credit, the one-pay lease option might make sense if you can afford it.

How does a car lease affect my credit score?

Leasing a car can impact your credit score in a few different ways. Just like any other type of financing product, your payment history can have a huge effect on your credit over time.

As you make on-time payments over an extended period, you can see significant growth in your score. But if you miss payments, your score will suffer just as if you missed a credit card or loan payment.

Your credit score also takes into account the amount of money you owe, and a car lease is included in that amount. However, it’s considered an installment loan with a fixed repayment period, which is favored more than revolving credit like a credit card or line of credit.

As you continue to pay down your lease amount, your credit score will improve because you’ll owe less overall. While these features of a car lease can help rebuild your credit over time, you may notice a slight dip in your score when you first take out the lease.

Why does your credit score temporarily decrease when you first lease your car?

There are two reasons. The first is that the lender will perform a credit inquiry as part of your lease application. That shows up on your credit report and causes a slight dip for a year.

The second reason is that opening any new account lowers the overall age of your credit accounts. Again, this impact goes away over time but does explain any short-term decreases you see in your credit score.

How can I help my chances of getting a car lease with bad credit?

One of the best things you can do is take the time to improve your credit as much as possible. Start off by checking your credit score to see what range you’re in. Then access your credit report to see what areas you should focus on.

If your debt is extremely high, for example, you may try paying it down some of it. Or if you have a lot of late payments listed on your credit report, you may consider disputing any inaccurate or incomplete information.

Another option to improve your chances of leasing a car is to save up more cash for your security deposit. While some leases may only have an optional security deposit, you’ll likely be required to put extra cash down when you have bad credit. Start setting aside extra cash so you can put more skin in the game and be considered for a car lease.

A final way to qualify for a car lease even with bad credit is to apply for a lease swap. You can use a third party service to get paired with someone who wants to get out of an existing lease. You can usually avoid paying a security deposit and the credit requirements usually aren’t as strict as when working directly with a lender.

Clearly, leasing a car isn’t impossible and there are even ways you can lessen your financial burden. As your current vehicle starts to age, start planning for your new car lease as soon as possible. That means taking steps to improve your credit as much as possible and saving up cash for an extra security deposit.