Do Leases Come Up on My Credit?

by Fraser Sherman
Most landlords don't report rent payments to credit bureaus.

Leasing a rental home or a car can make a good alternative to buying one, financially. The effect on your credit is mixed, however. Leasing a car almost always affects your credit score. Leasing a place to live isn't usually significant, but if you break the lease, that's no longer the case.

Credit Inquiries

When someone pulls your credit report, whether it's a landlord or an auto-leasing agency, the inquiry itself can affect your credit. The inquiry alerts credit bureaus that you're thinking about taking on more debt or financial obligations, which makes you a slightly riskier borrower. That lowers your credit a little. Fortunately, credit-scoring firms such as Fair Isaac realize you have to shop around for the best rates. If, for example, six leasing agencies pull your report within a 30-day window, your credit doesn't take six hits, it only takes one.

Rent and Credit

There was a time paying your rent regularly didn't help your credit at all. Credit bureaus simply didn't include rent payments in your history. In 2013, the "Wall Street Journal" reported that some credit bureaus do factor in timely rent payments, but only if you go through a third-party reporting agency, which may require a fee. Fortunately, if you're late with a payment, that won't show up either. Unfortunately, if the landlord hires a collection agency or sues you to get the money, that's definitely going on your record.

Leasing a Car

In the world of credit, leasing a car isn't any different from taking out a loan to buy a car. Either way, you have a new financial obligation and new monthly payments you have to make. Opening a new account of any sort drops your credit score, which with a car lease may need a year to recover from the hit. However, if you keep up the payments month after month, that's going to count in your favor when creditors pull your history.

Effects

If you lease a car, then apply for another loan -- a mortgage, for instance -- the added responsibility for paying the lease makes you a less-attractive lender. Fair Isaac says on its website that 30 percent of your credit score is based on how much you owe each month. As long as you keep up the payments, however, that's a plus: 35 percent of your score is based on your payment history. Your individual finances and previous credit history determine the exact effect.

About the Author

A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.

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