How Bad Credit Can Affect a Client’s Surety Bond

Viking Bonds: How Bad Credit Can Affect a Client's Surety Bond

Personal credit is one of the most crucial elements of securing a surety bond and setting the price for a bond. For some bonds, such as Mortgage Lender Bonds and Mortgage Broker Bonds, credit score is the primary factor in determining approval and bond rate. Here is some information on credit scores, and how they affect one’s application for a surety bond.

What is Good Credit and What is Bad?

Credit scores are graded between 300 at the low end and 850 at the high end. Anything above 750 is considered excellent credit, while lenders will consider scores below 650 to be unfavorable.

Bad Credit Means Higher Risk. Higher Risk Means Higher Cost

Surety companies calculate the risk of the principal before issuing a bond and charge the rate for the bond accordingly. A client with worse credit is often seen as higher risk to the surety, and thus, they have to pay a higher premium to make up for that higher risk. The reason for this is that the surety has a higher probability of experiencing a loss on the bond from a client with worse credit. To protect themselves from these losses, sureties charge clients with lower credit higher premiums.

 

While standard surety bond premiums range between 1% and 5%, a client seeking a surety bond with bad credit may be required to pay between 5% to 15% or more to secure their bond. In some cases, a client’s bond application may be denied due to their credit.

What if A Client Has Bad Credit?

In some cases, bad credit will simply mean that the client will pay a higher rate. In other instances, one may be required to post collateral to secure the bond.

Contact Us to Find Out More:

Having bad credit impact one’s ability to secure a bond and can be challenging, especially as bonds are required in order to work in certain industries and professions. At Viking Bond, we recognize that not everyone has great credit, and that over the course of your life, there may be extenuating circumstances that will reduce your credit. Viking Bond Service has access to several programs specifically for clients seeking surety bonds with bad credit.

 

To find out more about securing a surety bond with bad credit, get in touch with us today. You can give us a call at 1-888-278-7389, or complete the contact form on this page to connect with one of our knowledgeable and friendly surety bond professionals.

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