Surety bonds are insurance policies that cover companies against financial losses due to employee misconduct or bankruptcy.
They are issued by private insurers who guarantee the performance of their clients.
A surety bond is a contract between the company and its insurer. The insurer agrees to pay out claims from lawsuits filed against the insured company.
If the company defaults on its payments, the insurer pays the claim instead.
If you need to take out a surety bond, you could be worried about your credit score, because just like with loans, credit score will have an impact on the deal you can get.
Credit scores can make a massive difference in how well the process of getting a surety bond will go.
Credit scores are important because they determine whether or not you qualify for a loan. They also affect your interest rate and other terms.
Credit score calculations are complex. The three main components include payment history, amount owed, and length of time since last payment.
A credit score is a number that lenders use to determine whether or not you qualify for a loan. The higher your score, the better chance you have at getting approved for a loan.
Your score also affects your interest rate, insurance rates, and other fees associated with borrowing money.
Your credit score is calculated using information from your credit report. There are three main types of credit scores: FICO (Fair Isaac Corporation), VantageScore 3.0, and TransUnion Risk Score.
Each has its pros and cons, and each is important to consider when applying for loans, opening new accounts, buying a home, or even renting an apartment.
Realistically, any bond company, like a loan company will seek out individuals who have a score over 670, with no collections, judgements and so on.
If you have a credit score below 670, then that is okay, however, you will have to pay more for the bond. While this is not ideal, it is likely the only bet you have to get the bond.
Surety bonds are used by businesses to protect themselves from lawsuits. A surety bond company will require a credit check on anyone who wants to buy a surety bond for their business.
Like loans, credit and so on, you must undergo a credit check, simply because the company providing you with the surety will need to know how likely you are to pay them back, and if they should pay out a bond claim.
Credit scores are a great way for companies to tell if you are good at managing your money and if you have historically been reliable at paying companies back in the past.
With a high credit score, a company giving out surety bonds will know that you have been sufficient in repaying companies previously.
However, if your score is low then this might signify that you have not done a good job at repaying companies previously.
This will make you less attractive.
So, note that you do not actually have to pay the entire amount of your bond to get the bond, you only need to pay a certain amount of it.
This is something that your credit will affect.
So, if you have good credit, you can expect to pay somewhere from 1% to 3% of the total amount of the bond.
However, if you have bad credit this can then range from 4% to 15% of the entire bond amount.
So for example, if you wanted a bond that was $5,000, and you had a credit score of 680 or more, then you would expect to pay $50, for between 679 and 600 you could expect $150, but for a bad credit score of below 599, it would be anywhere from $200 to $750.
Another example would be if you wanted a bond of $100,000, for a good credit score you could be paying $1,000, for an okay credit score it would likely be around $3,000, but for a bad credit score it could be from $4,000 to $15,000.
These are just rough estimates, and are in no way solid numbers, however, they do indicate the difference that your credit score can make on the bond you take out, and how much you will have to pay on that bond.
Sadly, but thankfully, bad credit is a very common problem in the U.S. today. This is bad because many Americans are struggling to make it by, however, it is thankful, because this means that there are plenty of ways that you can still get bonds with bad credit.
Since bad credit is so common, companies can’t refuse to help those with bad credit, or they’d be awfully short on clients.
So, if you do have credit problems, do not worry, you can still get surety bonds even with poor credit.
Note what we mentioned above, you can get a surety bond even with bad credit you may just have to pay a higher price for it.
In this regard it is not that different to taking out a loan. You can still get a loan if you have bad credit, your interest rate is just high, this is exactly the same.
A score below 650 may have to pay nearly double the amount of a score over 650, but you can still get the bond in the end.
However, the one upside of surety bonds that loans do not have is that even if you have bad or no credit, you won’t be turned away.
