Does Renting a Car Affect Your Credit?

Many consumers aren’t aware of this, but renting a car can affect your credit, though not in every circumstance. Some car rental agencies do a hard credit inquiry on renters. Others report unpaid charges to credit bureaus. This article will explain both of these scenarios and provide tips on how to protect your credit when renting a car. Here are some key takeaways:

• There's a difference between a soft credit check and a hard credit check.
• You don't necessarily need "good" credit to rent a car.
• Unpaid rental fees can significantly hurt your credit.
• Knowing how credit checks work can help you avoid surprises.

Do car rental companies check credit?

Some, but not all, car rental companies require a credit check before renting a car. Hertz, Enterprise, and other major agencies publish their credit check policies. Smaller agencies may not. It’s important to ask about this if you’re a renter because a “hard inquiry” could negatively impact your credit score, at least for a short time.

A good credit score won’t change the car rental rate. Car rental agencies are more concerned with your payment method (credit or debit card) and driving record than your credit utilization rate. They perform the credit check to assess the risk of non-payment. Renters who score poorly might be required to make a larger deposit before picking up the vehicle.

Credit card vs. debit card: What triggers a credit check?

Credit checks are more common when the renter uses a debit card because the risk of non-payment is higher. To offset this, the car rental agency puts a hold on the account for an amount that should cover rental fees. Unfortunately, if the renter chooses to keep the car longer than expected, there may not be enough in the debit card account to cover the extra charges.

Agencies that don’t require credit checks may not accept debit cards as payment. Credit card companies offer better protections against non-payment, like guaranteed payment and fraud protection. They also report to credit bureaus, so cardholders know that non-payment will directly impact their credit score. We’ll explain more about that below.

Soft credit check vs. hard credit check: What's the difference?

There are two types of credit checks: hard inquiries and soft inquiries. Understanding them is crucial for protecting your credit score. Here are some key points of each:

Soft credit check

• Doesn't require your permission
• Doesn't affect your credit score
• Common in background checks or pre-approved offers
• Used for initial screening purposes

Hard credit check

• Requires your consent
• Shows up on your credit report and can reduce your score by a few points
• Common with loans, credit cards, and some car rentals
• Stays on your credit report for up to two years

The key difference is the impact on your credit score. Soft checks are harmless, but hard checks can lower your credit score for up to two years, typically by 5-10 points. Too many hard credit inquiries could also cause other creditors to deny your credit card or loan application.

How renting a car impacts your credit

Renting a car can affect your credit in two ways:

• Hard Inquiry Impact: When a rental company runs a hard credit check, it results in a minor, short-term credit score drop. This is usually temporary and shouldn't cause major concern for most people.
• Unpaid Fees Impact: If rental fees go unpaid and get sent to collections, the impact on your credit can be major and long-lasting. Payment history makes up 35% of your FICO score, so collection accounts can significantly damage your credit.

Do you need good credit to rent a car?

Low credit scores won’t typically prohibit you from renting a car, but they may restrict the way you pay for it. Debit card holders with bad credit could be denied outright. Credit card holders can generally still rent, because credit card companies offer payment guarantees. If you’re uncertain about your status, contact the rental agency.

The minimum credit score requirement for debit card holders renting a car ranges from 550 to 600, but that varies by company. If your score falls below that range, speak with the rental agency. Most of them are willing to work with low-credit applicants if they’re upfront about their situation. You should also have a credit card as a backup payment option if possible.

Tips to protect your credit when renting a car

Follow these strategies to minimize credit risks:

• Always use a credit card when possible. This single step eliminates most credit check risks and provides better fraud protection.
• Pay all fees and tolls promptly. Unpaid charges can quickly escalate to collections, causing serious credit damage.
• Avoid last-minute rentals that might involve rushed decisions. Take time to understand the rental terms and your payment options.
• Check your credit score before you rent so you're not caught off guard by any credit requirements.
• If using a debit card, ask whether a credit check will be performed and what the requirements are.
• Review your rental agreement carefully and understand all potential charges before signing.
• Monitor your credit after rental to ensure no unexpected inquiries or negative marks appear.

Frequently asked questions

Does renting a car build credit? 

No, renting a car doesn't build credit. Regular rental payments aren't reported to credit bureaus, so they don't help improve your credit score.

What's the minimum credit score to rent a car? 

There's no universal minimum, but debit card users typically need scores around 550 - 600. Credit card users generally face no minimum requirements.

Can I be denied a rental because of bad credit? 

Yes, particularly if you're using a debit card. Rental companies may deny applications from customers with poor credit or recent bankruptcies.

Do all car rentals require credit checks?

No. Credit card users rarely face credit checks.

Conclusion

Renting a car can affect your credit in two ways. The first is through a hard credit inquiry, which can lower your credit score by 5-10 points for up to two years. That’s usually done when the renter uses a debit card as their primary payment method. The second is when defaults or non-payments are reported to the credit bureaus. Credit card companies can prevent that from happening by offering payment guarantees. Contact the car rental agency if you have questions. It’s important to know their credit check policies before renting a car.