Bad Credit Surety Bonds

“Can I get bonded with bad credit?” is a question that is commonly heard for auto dealers. Another one is “Do you need good credit to get a surety bond?” When you’re looking into auto dealer bond bad credit, there are several factors to consider in the process. Your personal credit may not be the best in the world for lots of reasons, but that doesn’t mean you can’t get a surety bond if you need one.

What is Considered Bad Credit?

The first factor to look at is credit score that’s considered bad credit. When it comes to surety bonds, a score under 600 generally falls into the bad credit category. A few reasons that your credit score may be this low include:

  • Bankruptcies and judgements on file
  • High credit card balances compared to the credit limit
  • Overlimit accounts
  • Late payments
  • Defaulted accounts
  • Collections

Even if you don’t have any of these issues on your credit report, you may be held back by a shorter history. If you’re relatively new to holding credit, then it takes time to build up your history to show that you’re a responsible borrower. You can take steps to improve your personal credit, but these take time to bear fruit. One of the biggest factors in credit scoring models is your payment history and the balances on your credit cards relative to your credit limit. Put a plan in place to always pay your debts on time, and to drastically reduce the balances on your cards. In the meantime, if you need a surety bond, you’re going to need to consider a bad credit option.

What Credit Score is Needed for Bonding?

The credit scores needed for bonding are different from those that you would need for financial products like credit cards and loans. Surety bond companies know that a credit score does not always tell an accurate picture of your financial stability. If your credit score is low, the company does take on greater financial risk than they would with a good or excellent credit individual. They balance out this risk by charging a higher premium for the bad credit auto dealer bond.

How to Get a Surety Bond with Bad Credit

How to get a surety bond with bad credit? The process that you go through for a bad credit surety bond is the same as you would with good credit. You work with a surety bond broker or a surety bond company to get the bond that meets the necessary requirements. They’ll request some information from you so they fully understand what you need and so they can check any legal requirements in your state or local area. You’ll get free quotes that allow you to evaluate your surety bond options and see which one is the best for your dealership. You purchase it and file it with the obligee to complete the process.

How Much Does a $25,000 Bond Cost?

The price of the bond is where the real differences between a low credit and a high credit applicant come into play. The surety company charges a higher rate as part of their risk mitigation process. The typical surety bond for bad credit ranges between 5 to 15 percent of the total bond. For a $25,000 auto bond, this could be up to $2,500. The better your credit is, the less you pay, down to 1 percent of the surety bond amount. Since you’ll get a free quote before purchasing a surety bond, you’ll know exactly what rate you’re looking at. If possible, focus on surety bond companies that focus on low credit applicants, as they have services in place for this customer group.

Why are Rates Higher for Applicants with Low Credit?

Surety bond companies face higher default rates for low credit applicants, which can put them in a difficult position. By protecting themselves through a higher bond premium, the bond provider can offer their services to a wider pool of applicants without going out of business. This situation can be frustrating for bad credit applicants, but it’s better than not having access to surety bonds at all. The good news is that, as your credit improves, you’ll be able to access less expensive bonds over time. Your business goes on in the meantime, however.

Finance Your Bad Credit Surety Motor Vehicle Bond Premium

The high costs associated with an auto bad credit surety bond can be daunting, especially if you’re at the highest rate levels. However, you do have an alternative to paying it all upfront. Some surety bond companies offer financing plans that split your payment over time. Rather than trying to get several thousand dollars to the company immediately, you can pay it based on this plan. For auto companies that have consistent revenue, this is an excellent way to make the bond work for you.

Your personal bad credit shouldn’t hold you back from getting a surety bond. While bad credit bonds are more expensive than good credit bonds, they are out there for companies that need them.

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How We Can Help is a wholly owned subsidiary of American Contracting Services, a brick-and-mortar surety bond brokerage firm established in the 1990s. We understand the value of the internet in connecting us with individuals who are in need of personal attention and service. No matter what your credit rating, we can help advise you in the best course of action. Contact us today and let us put together an online surety bond quote for you that will exceed your expectations, whether you need a fidelity bond, contractor bond, dealer bond, or any other surety bond.

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