If you are involved in the construction industry and are looking to purchase a surety bond, you might have found that many companies actually conduct credit checks and other checks related to your finances. Like many, you might be curious about why this is the case. These are some of the reasons why a surety bond company may run a credit check on you before granting the bond.
Ensuring Your Company is Reputable
For one thing, as you probably already know, a surety bond company works to guarantee that you will fulfill your contractual obligations if you win a construction bid. The surety bond is in place for a number of reasons, but one of these reasons is often to help encourage potential customers to feel comfortable hiring your company to do the work.
Of course, the surety bond company is the one that has to actually back up your claims that you can do your work within the outlines of a specific contract, so they will probably want to know that you and your company are reputable as well. Even though running a credit check isn't necessarily a guarantee that you and your company are reputable, it can be a good indication that you are reliable and that your company is financially in a good place. This can help companies feel more comfortable granting a surety bond.
Ensuring You Have the Financial Means to Cover Costs
If the surety bond company has to pay out a claim, you will have to pay them. Having a good credit score can seem like a better indication that you might be financially stable enough to cover the cost, if necessary. Looking over your financial records can allow one of these companies to get a better idea about this as well.
Offering You a More Reasonable Rate
A company running a credit check on you before granting you a surety bond can actually be a good thing for you. For example, if you have good credit, you might find that the surety bond company will grant you the surety bond for a lower price. This can be a good way to get the coverage that you need without having to spend more money.
As you can see, there are a few reasons why surety bond companies run credit checks on their customers, and why they often perform other types of financial checks as well, like looking over your financial records. If you shop around, you should be able to find a company that will work with you. For more information, contact companies like NFP, P & C, Inc.