Many clients seeking licensing are turned down when they apply for their surety bond due to their credit. In some cases a company may have a surety bond placed with the same bonding company for years and then unexpectedly have their policy dropped.
The surety bond market has changed over the past couple years due to high claims and loss ratios; anyone who has applied for a surety bond with poor credit recently can vouch for that. Fortunately, there are still bonding companies that will write these high risk bonds.
The down-sides to bad credit bond programs (you knew there had to be one) are the higher premiums and cash collateral required. Acquiring a surety bond with bad credit can have premiums up to 20% with cash collateral of 10%.
What do you do if you have bad credit? Send your surety bonds applications to your bonding agency, they will try to place you in a standard market first and use the bad credit surety bond markets as a last resort. Be sure to try to fix your credit for following year renewal. Below are some tips on how to improve your credit score.
Improve your credit score for your surety bond renewal
1) Pay off your credit cards in full
2) Pay all bills on time to avoid collections
3) Own 2-3 credit cards that are used regularly and paid on time
4) Check your credit report for any incorrect information
5) Read online literature on the subject as this article is only a basis on how to start