5 June 2014
Bond rates have have gone down recently or rather, the cost of license bonds for lower credit scores has softened up. If your credit score is below 650 you should qualify for a better price on your license bond than in recent prior years.
11 Jan 2011
Lately it may seem that bond rates have gone up. Since the market crashed a lot of contractors have lost points on their credit score. License bonds are priced almost exclusively on credit score. I say 'almost' because other factors can have a negative effect on the bond rate. Factors such as prior claims on a bond, bankruptcy, and disciplinary action by the license board.
Most contractors however have never had a claim on their bond and even fewer have had disciplinary actions by the license board. Since the market crash bankruptcies are more common than either of these other two. By far the main factor in higher license bond cost has been a reduction in the contractors credit score.
This table will give you a rough idea of how your bond rate is affected by your credit score.
|Credit Score||1yr approximate cost|
|660 and up||$100 to $130|
|548-659||$250 to $655|
|Below 548||$1,284 to $1850|
|495 and lower||
It can be quite a shock to see your bond cost go from $100 to $1350 in a single year. Here are some tips to help keep you license bond cost as low as possible.
- If your credit is good purchase as many years of license bonding as you are allowed. Some companies offer up to 5 years and they give discounts for multiple years.
- If your bond cost has shot up make sure your broker has tried other markets. I have seen instances where one carrier quoted $1850 and another quoted $1284. That is quite a difference.
- Ask Venture Insurance Services to do your bond and mention this article. We will give you a 10% rebate on your bond. Be sure to contact us at least 30 days before your bond renewal date to ensure that we can give you the rebate.
Feel free to call our office with any questions about your bond.
We also offer an instant rater for your bonding.
License Bond Estimate
Standard Market Requirements:Numerous factors are considered when underwriting a commercial surety bond. Below you will find basic requirements in order of importance.
- Credit Score:650 or higher
- Claims:None prior
- Experience:3 years or more
- Personal Financials:Net worth 1-3x bond amount
Standard Market Estimate:$110 to $375
If you do not meet the requirements above, it is possible, but not likely to be approved in a standard market. If that is the case, we would see if you qualify for a high risk market. The requirements for high risk markets are much looser, which allow us to approve 99.9% of applicants.
- Claims:No losses paid by surety
- U.S. Citizen:Yes
High Risk Estimate:$500 to $1,875
*The above is not an actual offer, but an estimate of what your quote may be should you qualify. To obtain an approval quote, you need tocomplete an application.