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Renting a Car – Does it Hurt or Help Your Credit?

Renting a Car and Your Credit

If you’ve ever visited a car rental agency, then you’ve encountered the cumbersome list of rules and requirements rental agencies subject their customers to. It all starts when you hand them your debit card for the car that you reserved well in advance of your trip, only to have the clerk notify you that they require a deposit of twice the amount of your rental. Furthermore, they will be running a credit check to ensure that you meet their minimum qualification criteria. Now in addition to eating into your trip money, you’re going to incur an unwanted “pull” on your credit report.

Renting a Car and Your Credit

Why do Car Rentals Care About Your Credit Score?

Unless you’re paying with a debit card, car rentals don’t really care about your credit score. In fact, it’s not likely that a car rental company will pull your credit score if you are renting with a credit card, rather than a debit. From the rental agency’s perspective, potential borrowers with an active credit card pose less of a risk. It is assumed that consumers with only a debit card at their disposal are at the lower end of the credit spectrum and it may be more difficult for the agency to recover their losses if the vehicle becomes damaged in any way.

For this reason, an agency will run a credit check if you are using a debit card for your rental.

How a Credit Check Impacts Your Score

For various reasons, consumers don’t always have a credit card at their disposal. If you decide to move forward renting with a debit card, the rental company will run a credit check. Depending on the type of credit check that the company does, it could show up as a hard inquiry on your credit report. This may temporarily decrease your score a few points but won’t have a lasting effect on your report.

Hard inquiries typically only show on your report for a 12 month period. However,  if you are planning to apply with a primary lender in the near future, it’s a good idea to keep your hard inquiries to a minimum. Too many inquiries could show potential lenders that you are of higher borrowing risk and could result in a denial.

Can I Avoid a Credit Check?

The best way to bypass the credit check requirement during your car rental process is to use a credit card. Most companies will give you the option to secure the vehicle with a credit card but later pay with debit or cash once returned. This will help you avoid the waiting period for a refund on your deposit, and prevent an unnecessary credit check.

If you have an upcoming trip and you’re not confident about your ability to be approved for a credit card, talk to your bank about obtaining a secured credit card. Secured cards require the cardholder to deposit funds to be able to access the credit line. Because your own money backs the card, there is no credit screening requirement. If managed responsibly, this type of card can also help in rebuilding your credit profile.

Streamlining the Rental Process

The last thing you want is to think you have a rental planned, only to get to your destination and realize that you are stranded without a vehicle. Before you get to the location, call ahead and confirm what types of payment they accept. Inquire about credit, deposit, and documentation requirements, along with any age and mileage restrictions, so you know what to expect. Renting with a debit card isn’t necessarily the cheapest option, so shop around and find the best deal for you and your situation.

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