1. Payment History: Returning a leased car before the end of the lease term is considered early termination. If your lease agreement includes an early termination fee, this payment will be reported on your credit report. Timely payment of the early termination fee can positively impact your credit score, while failing to pay it can negatively affect your score.
2. Credit Utilization: The number of open credit accounts and the amount of available credit relative to your total credit limits impact your credit utilization ratio. Returning a leased car reduces the number of active accounts, potentially increasing your credit utilization if you do not have other available credit. A high credit utilization ratio can lower your credit score.
3. Length of Credit History: When you return a leased car and close the associated credit account, it reduces the overall length of your credit history. A shorter credit history can potentially lower your credit score compared to a longer one, especially if you do not have many other established credit accounts.
4. Inquiries: Applying for a new lease may result in a hard inquiry on your credit report. Multiple inquiries can temporarily lower your credit score, but the impact is usually minimal and fades over time. However, if you're applying for multiple loans or credit accounts within a short period, it can have a more significant negative impact.
5. Credit Mix: A diverse credit mix, including different types of credit accounts (such as loans, credit cards, and leases), can strengthen your credit profile. Returning a leased car and having fewer types of credit accounts may negatively affect your credit score, especially if you rely heavily on revolving credit (e.g., credit cards) and have limited installment loans.
Overall, returning a leased car can impact your credit in several ways, but the specific effects may vary based on your credit profile, payment behavior, and other credit-related factors. It is essential to carefully consider your financial situation and review your credit report before making a decision about returning a leased vehicle.
