A credit repair company is an excellent business to get into and can become very successful with a little hard work. As with any new business startup, there are some safeguards that must be put in place before “opening the doors” so to speak. One of the things every credit repair company needs is something called a surety bond. Most states require one of these bonds before a business can be legally registered. The following five items are what every person considering starting a credit repair business needs to know.
· Experience counts when it comes to applying for a surety bond. Underwriters want to feel confident that an applicant has some previous knowledge and experience working with credit repair services. Anything that could somehow relate to the business should be noted.
· The credit score of the applicant will impact the underwriting process. As with everything, a good or excellent credit score is always more favorable than low scores. Scores above 700 can expect to pay anywhere from 1.5 to 5 percent of the total bond amount. Credit scores below that number will pay much higher rates, as high as 10 to 20 percent of the bond amount.
· The premium for the bond will depend a great deal on the amount of coverage being requested by the applicant. It is important to ask for enough coverage, without getting too carried away and asking for more than is necessary. This will end up being a lot of wasted money that could be going back into the credit repair company.
· Know the difference between bonds issued to debt reduction companies and credit repair businesses. There is a difference and when applying for the surety bond, it is important the nature of the business is clear.
· Be prepared to do some research to find an insurance company that will issue a surety bond. Some companies will not provide these bonds for credit repair companies simply because of the high risk status. This isn’t to say it is impossible to get a bond. It will just require some legwork. Compare rates before starting the application process.
Because the applicant’s credit score greatly affects the rates and approval of a surety bond, it is important all of the research is done before actually applying for the bond. Each insurance company will need to pull a credit report, which will impact an applicant’s credit score. Choose wisely so only one credit report will be pulled.
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