Understanding Surety Bond Requirements And Credit Necessities
Many contractors may not realize the fact that credit can play a big role, when it comes to surety bonds. Underwriters look at your credit score as your ability to follow through on your commitments. If you have a bad credit score, you are going to be classified as a “high risk” company. Unfortunately, this may make it very hard for you to acquire a surety bond. Below, you will learn more information about how credit can play a role in surety bonds. If you are still not sure if a surety bond is what you need, read about what is required from you as a business to get bonded or the commonly asked questions page to be sure!
Why Credit Matters
Of course, there are many different factors that play a role in acquiring a surety bond. However, credit score is a major factor that can make a huge difference. If you are not able to pay off you debts on time or fulfill a development project, this makes your look irresponsible. However, if your credit is in good standing, you are going to be seen as a responsible company.
If you are labeled as a “high risk” company, you will have to apply for a bond through a non-standard bond market. Do not worry, because even with bad credit you will still be able to acquire a surety bond, but the process will be much more strenuous.
The major difference between a good and a bad credit score, in the terms of bonds is going to be the premium payment. The premiums for a company with bad credit are going to be much higher than if you have good credit. This is basically the same process for someone who is applying for a loan.
It is a possibility that you can lower your premium, even with bad credit. You could do this by presenting strong cash and liquid asset verification. Strong personal financial and business statements can also assist in lowering your premium. If at all possible you need to try to increase you credit score, before applying for a surety bond.
If you already know that your credit scores are low and not satisfactory for low percentage rates, you should do a bit of compare shopping. You can do this by using the free quote form, which can be found on various surety company websites. Just complete and submit the form to find out what type of percentage rate the surety is willing to offer you.
If you have previously dealt with a surety company, you should continue to do business with them, especially if the relationship ended on a positive note. The surety company will be familiar with your business ethics and may potentially offer you a suitable rate
Other frequently asked questions regarding surety bonds
- What Do Surety Bonds Cost?
- What Is Required In Order To Acquire A Surety Bond Within Canada?
- How Long Does It Take To Get A Surety Bond?
- Do Construction Bonds Expire in Canada?
- What is the Difference Between Construction Bonds And Contractors Insurance?
- Why Do Businesses Need Surety Bonds?
- Who Requires Surety Bonds?
- What To Look For In A Surety Bond Broker?
- How To Find The Lowest Annual Surety Bond Rates