Getting a Surety Bond with Bad Credit

Poor credit scores due to tax liens, foreclosures and other negative reporting do not automatically disqualify you from being bonded. Many surety companies can work with you by offering a bonding program for individuals with bad credit. If you are worried that credit issues will prevent you from receiving proper bond coverage for your business license, this guide is for you.

How Can I Get a Bond With Bad Credit?

Qualifying for a surety bond with bad credit requires the same steps as applying for a policy with good credit:

  1. Know the type of bond you need and check your state’s bond requirements for your specific business or industry.
  2. Know how much coverage you are required to have for your bond.
  3. Contact a reputable surety company licensed to sell bonds in your state.
  4. Get your bond quote by providing the surety company with your financial information and business details.
  5. Once your information is reviewed—and upon approval—you will receive your agreement stating what you will have to pay for your bond.
  6. Review your bond agreement, sign it and return it to the surety along with your payment.
  7. You will then need to provide your bond information to the state or to the industry organization that required you to be bonded.

It’s possible to be bonded with bad credit because other factors, such as payment history and prior bond experience, are taken into consideration by the company backing your policy. Reputable surety companies will work with you to get a free quote and make the bonding process as smooth as possible—whether you’re applying for a license, contractor, fidelity, court, or supersedeas bond.

Do Surety Bonds Cost More if I Have Bad Credit?

Beware of surety providers that claim to offer price breaks for applicants with poor credit. The fact is, you will pay more with any reputable surety company if you have bad credit. Think of it as paying a higher interest rate on an auto purchase; anyone with credit issues may be able to get a car loan, but they’ll pay a little more than those with high credit scores.

While pricing for most bonds is based on the applicant’s qualifications, the bond type, and the amount of coverage needed, there are some bonds that come with fixed rates. For example, a Legal Document Assistant Bond in California can be issued immediately and doesn’t require a credit history check.

The good news is that you can still be bonded and go on to accept work. Your surety company may even offer financing options for higher-priced bonds. Once your credit score improves, your risk factor will decrease, and any bond renewals or future purchases of new bonds will cost you less.

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What Other Factors Affect a Bond’s Cost?

In addition to an applicant’s credit health, your annual bond premium depends upon the amount of coverage you need and any prior claims you may have had on a bond. Prior claims may indicate that the policyholder fell short of his obligations. The more claims you’ve received, the higher your premium. Too many claims could result in a bond denial.

Will It Take Longer to Get Bonded if I Have Poor Credit?

Regardless of your state or industry, bad credit surety bond applications are treated just like any other bond application. You should be able to get a free quote in the same time frame as you would if your credit history was strong.

Next Step: Selecting a Bonding Agency

Now that you know you can get a surety bond even with bad credit, it’s time to decide who to choose.

Find out how to select the right company for your bonding needs.

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