You will pay anywhere from 1-15% of your toal surety bond cost. How can you get closer to the 1% rate?
Choosing the right surety bond company is one of the best things you can do to lower your surety bond cost, but there are many things you can do on your own.
Ways to Lower Your Surety Bond Cost
#1: Fix Personal Credit Issues
Your credit score is a main determining factor to how much you'll pay for your bond.
Why? The surety company needs to see how likely you would be to pay them back if a bond claim were to occur. Your credit score is a great way to see how you've repaid companies in the past.
The first step to fixing your personal credit issues is to understand what affects your credit score. Slower or over-due payments, excessive use of your credit line, and having little or no credit history can all negatively affect your credit score.
To improve your credit score, focus on the following:
- Pay off outstanding payments like judgements, tax liens, and overdue child support
- Keep your credit cards below 30% of their limit
- Pay on-time and above the minimum needed amount
- Don’t seek out new credit cards to pay off old ones
Pro tip #1: Make sure you understand what works and what doesn't when it comes to rebuilding your credit score. Not sure? Check out this article "What is Wrong With Your Approach to Rebuilding Your Credit Score".
Pro tip #2: Do you have a credit score lower than 549? Did you know there are actually credit cards that encourage better credit usage and improve your credit score? Learn more here: "Best Credit Cards for Bad Credit"
A better credit score can significantly lower your surety bond cost. Compare the green column (good credit scores) with the red column (bad credit scores).
The important thing to note is that you can still get bonded with bad credit, you'll just have to pay more.
#2: Talk to Credit Agencies
Federal law allows you to get a free copy of your credit report every 12 months. Federal law also allows you to correct any misinformation that may appear on your report.
If you notice any inaccuracies on your credit report, send the corrections to the credit bureau in writing. Be aware that suits, liens, and judgements (even if resolved) can still appear as open or pending on your credit report.
(Starting July 2017, credit reports from Equifax, Experian, and TransUnion will no longer show tax liens and civil judgements.)
If cases like these appear on your report, send the reporting agency proof of resolution so they can update your report.
#3: Improve Your Working Capital
Your working capital is your current assets minus your current liabilities. This calculation gives the surety bond company a quick look at your liquidity and your ability to pay your bills. Improve your working capital, lower your bond cost.
You can boost your working capital by refinancing short-term loans into long-term liability. This will turn your short-term debt into long-term debt, which will improve your working capital.
More capital equals a lower bond cost.
#4: Provide Strong Financials
A history of success will give the surety bond company you’re working with confidence that you will not need to use the bond. They will investigate how you managed your business and financials in the past and use this information to project how you will perform in the future.
Providing excellent and reliable references during this process will help lower your degree of risk for the surety bond company, and lower your bond cost.
#5: Get Your U.S. Citizenship
Surety bond companies can view non-U.S. citizens as higher risk. This is because non-U.S. citizens have no physical ties to the U.S. that would keep them here to pay bond claims.
Getting your citizenship can automatically lower your risk, therefore lowering your bond rate.
#6: Choose a Reliable Surety Company
This is perhaps the most effective way to lower your surety bond cost.
Not all surety bond companies are alike. Some will have more underwriting than others, and some will charge higher premium.
Researching a surety bond company before you work with them will give you peace of mind as you start your bonding process.
What to look for in surety bond companies:
- Do they have a wide range of experience?
- How is the company’s reputation?
- Is the company’s underwriting done ‘in-house’?
- Does the company broker business through other bonding agencies?
- Can the company accommodate to your specific bonding needs?
Surety Solutions has over 50 years of experience in the surety bond industry.
Why choose Surety Solutions? Here's why you should choose us.
We have financing options for higher premium bonds, and we can help you if you’re worried about your credit.
The best way to see what you'd pay is to get a free quote: