Battling your way back from a bad credit score is one of those struggles that can last decades. Fortunately, it doesn’t have to prevent getting an auto dealer bond in order to operate a dealership.
There are ways to secure a bond with a reasonable premium, even if you’re having trouble with personal credit.
The first step is to understand the basics of auto dealer bonds; you can’t influence your premium if you don’t know how it’s calculated.
Bonding agencies are evaluating risk in terms of how likely you are to have a claim filed against you and your ability to pay back that claim. So your focus should be finding ways to show how reliable you are in spite of your personal credit score. There are a number of ways to do this.
The most important element of getting bonded despite bad credit is simply choosing the right agency. In particular, look for larger agencies that work with a spectrum of bond providers.
A high-volume agency has access to almost any bond program you could need and has more leverage to negotiate the best possible rates. It also is more likely to find a bond provider willing to work with you.
But even after you’ve chosen an agency, there’s a lot you can do personally to increase your likelihood of getting bonded and getting a good premium.
Although this is connected with your credit score, paying off tax liens, civil judgments or collections really can make a difference in your bond premium. In the long run, these actions also should positively affect your credit score. But even before this happens, showing the bonding agency that you’re making an effort to pay off debts will help.
Demonstrating that you have experience in the auto industry and that you’ve got a great track record with clients will show you’re not likely to bring about claims. This ties directly back to the idea of proving your reliability.
How you show this experience can vary, but think about the end goal when putting together a packet of documents to send along when applying for an auto dealer bond. Experience, professionalism and responsibility all should shine through.
This also is good news for anyone renewing their auto dealer bond, as the longer you’re bonded without any claims, the better your rate should become.
If you’ve got a bad credit score, undoubtedly you won’t want to be judged on that number alone. So put together a packet of other financial documents that can demonstrate you’ve been financially responsible even if your credit score doesn’t necessarily reflect this.
This can include any paid debts that wouldn’t otherwise show up on your financials or credit score. It also can include a breakdown of your assets. Having a greater proportion of liquid assets will be viewed favorably by a bonding agency.
Think of your bond application as a kind of job interview. You need to show your best side. Everything put together for your application should reflect this. If you make a visible effort and put your best foot forward, you may be surprised how easy it is to get bonded and how low your premium can be.
How have you managed to lower your auto dealer bond premium? Have you tried things that failed to make an impact? Let us know about your personal experiences in the comments section.
Eric Halsey keeps a close eye on automotive retailing trends for JW Surety Bonds.
