How much do Bad Credit Surety Bonds cost?
The cost of Bad Credit Surety Bonds typically ranges from 4-10% of the bond amount. This means if you need a $10,000 surety bond, you can expect to pay between $400 and $1,000 each year the bond is in place. In another example, we’ll use the Florida Car Dealer Surety Bond amount of $25,000. An applicant with bad credit should expect to pay $1,000 to $2,500 depending on their credit score.
Why are Bad Credit Surety Bonds more expensive?
Bad Credit Surety Bonds are generally more expensive than surety bonds issued for individuals and businesses with good credit. The reason for the higher cost is because a surety company generally underwrites each surety bond based on an individual’s credit score. Your credit score is an indication of your ability to repay a surety company if a claim on your bond occurs.
What things effect my credit score associated with Bad Credit Surety Bonds?
Instances like late pays, repossessions, foreclosures, liens, and the amount of revolving credit available can influence your credit score negatively. Generally, the aforementioned instances could also lead to higher surety bond premiums. However, credit scores are just one indicator of the applicant’s ability to reimburse a surety company when a claim occurs. Let’s use a home foreclosure for our example. A foreclosure will impact your credit score dramatically but let’s say the foreclosure was a “strategic foreclosure” and your personal financial statements show money in the bank and other liquid assets. A surety company may be willing to consider those facts and reduce your annual premium based on your explanation and condition of your personal financial statement.
What are Bad Credit Surety Bonds?
Bad Credit Surety Bonds are no different than those bonds issued for individuals and companies with good credit. The same bond forms are used, the same bond amounts are required, and the bond itself functions just like one written for an individual with good credit. The only difference is the amount of premium the surety company charges for it. Again, the company is charging more for what it feels like is an increased risk based on your credit history.
How can I reduce the cost of Bad Credit Surety Bonds?
We touched a little on this in a previous paragraph but there are things that you can do to reduce the amount of premium charged for your Bad Credit Surety Bonds. A personal or business financial statement showing a sufficient amount of cash and other liquid assets (stocks, cash value of life insurance, etc.) can help. A cosigner with a credit score of over 700 and who is willing to sign the indemnity agreement could also reduce your surety bond cost. Ultimately, anything that helps to convince the surety company that you and/or your company are less of risk could help reduce your annual surety bond premium.