How to Get Bonded Despite Having Bad Credit

Eric Weisbrot photo
by Eric Weisbrot

Having a surety bond is a requirement in many states for several different types of professions. From licensed construction contractors and tradesmen to mortgage brokers and freight brokers, a surety bond helps protect customers against fraudulent or incomplete work.

Financial losses are covered under a surety bond, and the surety agency backing the bond pays the customer for a successful claim. However, the individual owner of the bond repays the claim amount over time. For this reason, having a solid track record of responsible financial management is a must.

Surety agencies want to feel confident that you pay your bills on time, and the best representation of this important information is your credit history and score. When you have a low credit score or a negative credit history, you may think getting a surety bond is out of your reach. The good news is that could not be further from the truth; however, you need to know what it takes to get bonded despite having bad credit. Here are proven tips to help you through the process.

Know Where You Stand

If you haven’t checked your credit in a while but you’re in need of a surety bond for your business, getting an updated credit report is the first step in the process. Many people bury their head in the sand when they have credit blunders on their report, but knowing is half the battle. You can check your credit reports from the three major credit bureaus – Equifax, Experian, and TransUnion – once each year, for free. Getting these  details allows you to know where you stand so you can move forward in the bonding process effectively.

Work to Fix the Negatives

One of the reasons for gathering your credit reports is to uncover any negative items or errors that may be dragging your score down. Negatives may include missed payments on loans or credit cards, bankruptcies, civil judgments, or liens against you or your business. While these play a big part in a low credit score, you may not be able to expedite their removal. However, errors can also drag down your score, including incorrect account details. These can be fixed with a little know-how.

You can use the dispute process through each of the credit bureaus to have errors removed, or you can work with a professional to do so. Either way, getting inaccurate negative marks off your credit will help boost your financial profile before applying for a new bond.

Establish Good Financial Habits

If you have some time before you need to get your surety bond, working on improving your credit history and score is your next best move. This can be done by keeping your financial house in order. On the personal financial front, take care to pay your bills on time each month, and avoid using too much of your available credit when possible. From a business perspective, be sure to have accurate and organized records ready to present to your surety agency. These small steps can go a long way in helping you get a surety bond with bad credit.

Consider Financing

If you don’t have time on your side when it comes to your surety bond, consider your options for financing its purchase. Surety bonds are priced as a percentage of the total bond amount requested. For those with bad credit, this percentage is far higher than those who have a clean bill of financial health. Some surety agencies offer financing for a larger surety bond price. You can also look to outside financing sources, like a loan, line of credit, or credit card for temporary help. If financing is the strategy you take, be sure to read the fine print, taking a close look at the fees associated with stretching out your surety bond premium.

Work with the Right Surety Agency

Finally, working with the right surety agency is a key factor in securing an affordable bond for your business activities. Surety agencies that work with several different bonding partners offer the most flexibility for those who have bad credit. Additionally, the right surety agency will work to understand your circumstances and budget to help you find the best solution available. A good surety company also helps if a claim is made against your bond in the future, which can save you time and money.

Getting a surety bond with bad credit may seem like an impossible task, but you are not completely out of luck. Start by knowing where you stand with your financial history, and take the time to clean up your credit before applying for a new bond. Build up good financial habits when possible, but also consider your options for financing your bond premium if the cost is still too high. Always be sure to work with a surety agency that understands that bad credit happens to get the best bond possible.

About the Author: Eric Weisbrot is the Chief Marketing Officer of JW Surety Bonds. With years of experience in the surety industry under several different roles within the company, he is also a contributing author to the surety bond blog.

No comments

Back to Top