So you are starting a new business and you need to get licensed and bonded, but your credit isn’t that great. For individuals with bad credit, surety bond costs can increase dramatically, and fast. But first of all, what is bad credit?
What is Bad Credit?
In the surety bond industry, ‘bad credit’ or ‘non-standard’ is considered to be a FICO score of below 650.
FICO scores range from 300 to 850 and are classified as follows:
- 750 or above: excellent
- 700-749: above average
- 675-699: good
- 650-674: fair
- 550-649: subprime
- 549 or lower: poor
If you have good credit, you can expect to pay 1-3% of your total bond amount (sometimes even less, as low as 0.5%). If you have bad credit, you will have to pay more, anywhere from 4-15%.
So how much do you pay?
- $50,000 surety bond with good credit: You pay $500 - $1500
- $50,000 surety bond with bad credit: You pay $2000 - $7500
Do You Need a Bad Credit Surety Bond?
Do you need a surety bond, but are worried because you have bad credit? We have negotiated rates on the low end of the spectrum so you can get a surety bond with bad credit.
We've bonded people who never thought they could ever get a bond!
Worried about a past bankruptcy? Check out this post on getting approved with a bankruptcy.
Calculate the Cost of Bad Credit Surety Bonds
So how is your bad credit cost calculated? To calculate bad credit surety bond costs, think of a function machine. Many many factors go into a function machine to create an equation and then out pops an answer on the other side. Now apply this to surety bonds.
What goes into the function machine is the type of bond, the obligee (or the person who is protected by the bond), the applicant, and the surety company who issues the bond. This all determines the price, or rate, you'll pay for your bond.
Bond Type + Obligee + Applicant + Surety = Price of Bond
The important thing to recognize is that if you have bad credit, you can still get bonded.
How To Improve Bad Credit
Avoid Paying More
There is a way to avoid paying an arm and a leg for your surety bond: if you shop your bond with the right surety bond companies, you have the ability to get your bad credit surety bond at the lowest rate possible.
This is because surety bonds are not only dependent on your credit history, but on if the surety company you go through has access to the lowest rates in the surety market. There are over 25,000 varieties of surety bonds in the US, so you can only imagine the range of costs.
Choosing the right surety bond company—one that will shop your risk to find you the lowest possible rate for your surety bond—is the first step you should take when trying to get a bad credit surety bond.