Are you keeping control of your credit and making payments on time? Are you not exceeding your credit limit?
Not too much debt on your shoulder? These questions are fundamental as they directly affect your credit score.
First Things First…What Is A Credit Score?
Now, let us first look at what credit score is. A credit score is a 3-digit number generated automatically by algorithms, used to determine the likelihood of a debtor honoring or defaulting on their credit obligations. A credit score can either be good or bad. Good credit score means you are eligible to get a loan which in turn means saving hundreds of dollars for you when it comes to the interest rate.
On the other hand, bad credit score gives a negative impression on the lender as they consider lending you a risky financial decision. , but aside from them, other institutions may call your credit score to question before they can engage with you in any business ventures. Some of these include insurance companies, construction, telecommunication industries, and contractors.
Contractor Bond: A Surety To Pay
Before assigning any job to a contractor, a thought that generally comes in mind is who will pay for the loss?” A loss is something that you cannot predict. Losses have this element of surprise that makes both parties want to premeditate on steps to undertake in the event they occur.
For this purpose, the contractor bond is a blessing as it involves three parties who ensure that all work is done according to the agreement statement.
Contact a company that offers California contractor bond services to find the best price.
Contractor Bond Pricing
There are different types of contractor bonds, and each has its own cost. We have a bond lower the price of the project, a bond lower the price of the bond and lastly, there is a contractor bond that’s similar is the case with high-risk projects. Your bond rate is highly dependent on your credit score.
However, you should never forget that there are other factors also which help in setting the price of the bonds. For example, some projects are riskier than others so that the high-risk projects will have a higher rate as compared to low-risk projects.
Contractor Bond Depends On Your Credits
As already been mentioned, a good credit rating shows your creditworthiness. Mostly, it shows that you can pay your debts on time, can properly manage your credit limits and have proper records of your bank statements. Your credit score shows your reputation and signifies how well you have paid your companies. High credit score means that you can be trusted when it comes to a favorable settlement of debts. Similarly, a low credit score marks a negative impact on the contractor.
Likewise, a contractor company will surely recommend and put more trust in a person with a good credit score by looking at their past payment records. Credit score with 750 and above is considered an excellent, making it easier for you to pay less for the bond. On the other hand, 550 or lower credit score comes under poor credit rating, adversely affecting your eligibility.
Why Good Credit Score Is Necessary
The price of a contractor bond and credit score are inversely proportional to each other. The higher the credit score, the lower the price of a bond. This means that a company may not be reluctant in dealing with you as you have been diligent in clearing all your past payments. As a result, a confidence level is developed. Similarly, a low credit score means there is a lower trust level by a company which results in a high price of a bond.
Obviously, you need to put trust and confidence into someone before hiring or working with them. You will need to look at their financial position, their credibility, and their payment mode beforehand to save yourself from a possible risk of defaulting in the future. Same is the case with bonding companies. Before issuing a contractor bond, they look at all these aspects to know whether the client has the potential to pay or not, and the best way is to have a look at their credit score.
For example, construction is a high-risk project which includes, among other risks, the risk of non-completion of work on time, damage during work, late payments to laborers, to mention but a few. Going by these, a contractor bond will be given to only those serious client who have a good credit score and those who have proven they are least likely to default with their payments.
Conclusion
A contractor bond is highly dependent on your credit and credit score. The higher the score, the higher the likelihood to get a contractor bond with the lowest price.